JP Morgan's Loss Share Deal With First Republic Bank

First Republic Bank has a relatively large exposure towards commercial real estate but also single family housing. The collateral underlying these loans is under water given the recent developments that we've seen price-wise in both commercial and residential real estate. First Republic simply needs to replace these deposits with another funding source, so they took up large emergency loans at the Federal Reserve to cover for the depositor base. FDIC ultimately has to take a loss now given that this emergency lending cannot be fully covered in the deal with JP Morgan.