The FDIC's Loss Sharing Agreement With First Republic

First Republic got itself in trouble by making low interest mortgages to wealthy people who will most likely pay off their mortgages. The issue wasn't the credit risk it was that the loans had fallen significantly in value due to the rise in interest rates. JP Morgan's presentation even highlights the high quality portfolio of loans with a strong credit profile so why did they need a loss sharing agreement with the FDIC? Well a normal mortgage loan on the books of a bank like JP Morgan would require them to fund the mortgages with around 7% equity capital. When they get the FDIC to agree to a loss share agreement it makes the loan safer and that means that they have to put up much less capital to earn