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JPMorgan Chase to Buy Most of First Republic Bank Assets; Manhunt Underway for Texas Shooter Accused of Killing Five; Second U.S.-Led Convoy Evacuates Americans from Sudan. Aired 5-5:30a ET
Aired May 01, 2023 - 05:00 ET
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CHRISTINE ROMANS, CNN ANCHOR: Welcome to our viewers in the United States and around the world, I'm Christine Romans. We begin with breaking news on what's now the second biggest bank failure in U.S. history. Most of First Republic Bank is now being bought by JPMorgan Chase in a deal arranged by the Federal Deposit Insurance Corporation, he FDIC.
CNN's Clare Sebastian live in London for us. And Clare, this deal announced just a short time ago, all weekend, we had been waiting for word on what would happen to First Republic. We knew that it just could not continue as a growing concern here, and that the FDIC would have to step in. Indeed, it did, it seized the bank, had an auction for it and JPMorgan Chase people wake up this morning, you went to bed thinking that First Republic was your bank, it is now JPMorgan Chase, right?
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, depositors would be protected though, Christine, under the current FDIC limits and all 84 branches, according to the FDIC. First Republic will reopen this morning as branches of JPMorgan. Now, this is different from what happened with Silicon Valley Bank, which of course, was taken into receivership by regulators, by the FDIC, and stayed there for more than two weeks.
This has happened much more quickly over the weekend with that auction held on Sunday. Several banks bidded, but it seems they reached that deal with JPMorgan. This will be the second biggest bank failure in U.S. history. The third bank failure since the beginning of March, but the biggest of the three of those, and the biggest overall since the collapse of Washington Mutual all the way back at the beginning of the financial crisis. The great financial crisis.
So the way this deal is structured, it's not your typical commercial acquisition, obviously, because it came after that auction by the FDIC. But JPMorgan will assume all of the deposits, substantially all of the assets of the bank. It also comes with a sweetener and incentive, this sort of lost-sharing agreement whereby the FDIC also limit the exposure of JPMorgan to the loans of First Republic.
And as I said, depositors will be protected and all of those branches will reopen as branches of JPMorgan. This of course, coming after six weeks really of speculation and pressure around First Republic after the collapse of Silicon Valley Bank. All of that coming to a head in the past week after a report that show the sheer scale of deposits out --
ROMANS: Yes --
SEBASTIAN: For us from the bank in the first quarter. And then that report on Friday from "CNBC" that said that it was likely to be heading for FDIC receivership, which is of course, in the end, what happened, all of this, part of this crisis of confidence that we continue to see in the banking sector.
ROMANS: Yes, we wonder if this is the end of that crisis of confidence or if it stirs new concerns. One thing I know that bankers have been very careful about and regulators, frankly, over the past two months now, two and a half months is the appearance of any kind of taxpayer bailout. The FDIC says it will take a $13 billion hit to its insurance fund. That money is paid for by bank fees. Am I right?
SEBASTIAN: Yes, that's essentially, sort of -- I always think of it like a sinking fund, right? They pay into it in the event that something like this happens. So it avoids going to taxpayers, but of course, the banks still have to pay into it. And they're estimating 13 billion at the moment, but they don't know for sure the final price, until that FDIC receivership is officially terminated. But it is as you say paid for by the industry.
ROMANS: All right, so nice to see you this morning, a very busy weekend for regulators and bankers. Thank you so much, Clare. Right, more than 200 law officers now searching for the gunman accused of killing five people including a 9-year-old boy in the small town north of Houston, Texas. Survivors say the suspect was angry after they asked him to stop firing his rifle so close to their house. Now, authorities warn he's on the run, armed and dangerous. CNN's Ed Lavandera is on the ground in Texas with more.
ED LAVANDERA, CNN CORRESPONDENT: While the hunt continues for 38- year-old Francisco Oropeza; the man who is accused of shooting five neighbors on Friday night here in the town of Cleveland, Texas. The husband and father of two of the five victims is detailing to us exactly how the night unfolded. Wilson Garcia says he was at home with a group of friends when they asked he and two other men, walked over to the home, their neighbor's home, Oropeza and asked him to stop shooting his weapon so close to their property because their baby was trying to sleep.
He says they asked him just to shoot the weapons on the other side of their property. It was a very tense exchange, Garcia said they had already called authorities and 911 five times prior to that. And then 10 to 20 minutes later, that's when Wilson Garcia says that Francisco Oropeza came back to their house, didn't say anything else and started shooting people.
[05:05:00] One of the first who died, he said was his wife. He says that the man
then started going through the house, shooting people in other rooms. Oropeza says one of the women told him to get out of the house as quickly as possible because his wife and son were already dead, and that they didn't want to lose him because his two other children didn't -- shouldn't lose both parents.
Horrific details that Wilson Garcia is detailing of that night. In the meantime, investigators continue this manhunt. This -- they have been searching for Francisco Oropeza since Friday night when he was able to flee the scene. But at this point, investigators say they have no idea where he might be.
UNIDENTIFIED MALE: But right now, we just don't know because if we did, we would have him in custody right now. We do not know where he is. We don't have any tips right now to where he may be. And that's why we've come up with this reward so that hopefully, somebody out there can call us. I pretty much can guarantee you, he's contacted some of his friends. Right now, we're just -- we're running into dead- ends. Right now, we have zero lead.
LAVANDERA: In hopes of trying to get information on Francisco Oropeza's whereabouts, the state of Texas and various law enforcement agencies have thrown together money for a reward. It is $80,000 for information that leads to the capture of Oropeza. But as I said, at this point, investigators say they have lost track of where he was Saturday. They found his cell phone and some clothes discarded in this area.
But so far, other than that, they have no idea where he might be at this point. Ed Lavandera, CNN, Cleveland, Texas.
ROMANS: It's just a terrible story there, Ed, thank you. Now, to the race to escape war-torn Sudan. One hundred Americans are among those now docked in the port of Jeddah after being evacuated. A new convoy of U.S. citizens arriving in Port Sudan Sunday was the second convoy in as many days escaping the violence that has killed hundreds including two Americans and wounding thousands more.
CNN's David McKenzie is following the story for us from Johannesburg. David, Americans trapped by the fighting, have been venting anger and frustration at being in there, in their view abandoned by the U.S. government. What have U.S. officials been saying?
DAVID MCKENZIE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Christine, they are saying they're ramping up these evacuations, and you have that latest ship docking in Jeddah in Saudi Arabia with around a 100 Americans and people of other nationalities that they've managed to spirit out of Port Sudan across the Red Sea and to Saudi Arabia.
Now, there is the latest of several dockings that have happened in the past few days. You're right, there has been significant criticism from those stuck in Sudan and from family members in the U.S., complaining that the level of support and the speed of the support wasn't enough. U.S. officials have repeatedly said that the air route out of the country, which is obviously how diplomats got out with armed guards is too dangerous.
But while the U.S. efforts ramp up, many countries including the U.K. have wound down their evacuations of their nationals out of the country via an air strip in the north of the capital. There has been an extended truce, ceasefire by both warring parties that will go on after today. But these ceasefires really have been in name only while there have been some periods of calm, there are still sustained fighting.
Over the weekend, substantial clashes in the capital around the presidential palace to the north of Khartoum and also in other parts of the country. The big question now is how to get humanitarian support in for those still stuck in the country. Many millions of them -- the World Food Program director recently said that they're going to resume their operations after several of their staff members were tragically killed. Hopefully, that will bring some more food aid into the country, Christine.
ROMANS: All right, David, thank you so much for that. All right, in just a few hours, House Speaker Kevin McCarthy will address Israel's parliament on McCarthy's first trip abroad as speaker. He visited the western wall and met with his counterpart in the Knesset where he stressed the things that U.S. and Israel have in common.
(BEGIN VIDEO CLIP)
REP. KEVIN MCCARTHY (R-CA): Just as America is more than a country, Israel too is an idea. An idea about democracy and freedom fostered in the Middle East. There's a reason why you have challenges, but you have shared values and independent -- shared challenges and enemies. And we work better together.
(END VIDEO CLIP)
ROMANS: At 9:00 a.m. Eastern, McCarthy will become the first U.S. Speaker to address the Knesset since Newt Gingrich back in 1998. Just ahead, see the moment a tornado touched down in Virginia Beach, plus, the emergency just declared in Texas as the southern border braces for a new surge of migrants.
And the pope's secret mission. Can the Vatican really end the war in Ukraine?
ROMANS: All right, just announced, JPMorgan Chase will purchase most assets of First Republican Bank in a deal arranged by the FDIC. The federal agency held an auction Sunday and accepted bids from top banks including JPMorgan. First Republic is the second largest bank failure in U.S. history, the third bank to fail in just the past couple of months. I want to bring in former Chief Innovation Officer for the FDIC, Sultan Meghji. So nice to see you this morning, what a weekend, just watching to see what was going to happen with First Republic. Sultan, it was pretty clear by the end of last week after we saw from its earnings report that this -- First Republic just couldn't go on alone anymore.
SULTAN MEGHJI, PROFESSOR, PRATT SCHOOL OF ENGINEERING, DUKE UNIVERSITY: Yes, that's absolutely right, I think, you know, all this, we're just slightly surprised to hear that First Republic lost, you know, basically, half of their deposits, and you know, the regulators and a variety of banks have been working now for about 6 weeks to do something about it. But that earnings report and the depository loss was a big gap.
ROMANS: Well, and so much of banking is about confidence, right? And so, after those first two big bank failures last month, I mean, it really shook the confidence of the banking sector. Do you think that loss of confidence is behind us now or still a problem?
MEGHJI: Yes, it's a great question. You know, certainly, I think the immediate problem has passed. The challenge of this is that, a lot of the pressures on the banking system that led to these last three collapses are still there. You know, the increased rate hikes from the Federal Reserve. The cost of bonds, the overall balance sheet struggles is still there for a number of institutions.
And I think over the coming weeks and months, we're going to be looking for more institutions to shore themselves up, and we've seen some good signs of that, but we're not entirely out of the woods on that --
ROMANS: You know, it was only about six weeks ago that 11 banks all kicked in some $30 billion to give a deposit lifeline to First Republic. There's a lot of discussion over the weekend, you know, did that not work or maybe it did work, because it did give First Republic six more weeks alive really, I guess to find a solution.
MEGHJI: It's absolute, what we did, and it's important to remember that, you know, $30 billion lifeline really had a clock attached to it of about 90 days. And so, to see that it was solved, you know, roughly-speaking, halfway through it, you know, I'm slightly optimistic that, that actually worked. I think the challenge is, you know, how many more banks out there need some degree of a lifeline, either from the rest of the banking sector or from the regulators over the next, let's say, six months.
ROMANS: I'm wondering about, you know, what -- the thing that has changed for these banks over the past year are higher interest rates, you know, from near 0 percent to around 5 percent. That is a big --
MEGHJI: Yes --
ROMANS: Big change for their, you know, operating environment. And the Fed is going to meet again this week, and they're expecting another 25 basis-point rate hike. Does the weakness in the banking sector should have been giving the Fed more pause?
MEGHJI: Yes, you're not the only person that asked that. And I think, you know, a lot of people are wondering, you know, when are we there? Is this the last one? I would be surprised to see the Fed fundamentally alter course for the overall economy because of, you know, one issue in the banking sector.
ROMANS: Yes, we got -- we got the sort of the postmortem from the Fed about a Silicon Valley Bank. And it wasn't very favorable to management of that bank, but also to regulators. Regulators failed to appreciate just what was happening. Didn't they?
MEGHJI: Yes, that's absolutely right. You know, I think -- I really read two things out of that report. The first was that there really isn't a good analytic system at the regulatory level that will look at outside indicators of risk, not just the internal risks to a bank. You know, do you have delinquent mortgages and things like that.
You know, that's the traditional way regulators examine banks. And the second is that, you know, pretty much everything in that report we've known and we've known for a long time. I think, I, like a lot of other people are looking to see, will the regulators actually do something about it?
ROMANS: Yes, absolutely, Sultan Meghji, so nice to see you this morning, thanks for getting up early for us. Big weekend in the banking sector --
MEGHJI: Good to see you --
ROMANS: Thank you. All right, quick hits across America now. The National Weather Service confirming a tornado hit Virginia Beach Sunday, damaging as many as 100 homes. Officials say there were no injuries from Sunday's twister, although the utility company had to respond to gas leaks in those damaged homes.
El Paso, Texas, is bracing for the unknown with Title 42, the COVID- era border restrictions set to expire on May 11th. The mayor declaring a state of emergency so the city can be prepared for what they expect to be an influx of migrants. President Biden took to the stage for the annual White House Correspondents' Dinner poking fun at others and himself.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES: I believe in the First Amendment, not just because my good friend Jimmy Madison wrote it.
(END VIDEO CLIP)
ROMANS: Beside making fun of his own age, Biden made sure the media got their fair share of roasting as it's of course, the finishing. All right, later today, Ed Sheeran back in a New York courtroom. Will he bring his guitar again? Plus, Cuba running on empty.
(BEGIN VIDEO CLIP)
PATRICK OPPMANN, CNN CORRESPONDENT: Once the gas actually arrives, so people come rushing back, they cut the line, and that's when all hell breaks loose.
(END VIDEO CLIP)
ROMANS: Moscow is looking unprepared for Ukraine's imminent counteroffensive. The Russian army unceremoniously firing its deputy Defense Minister in charge of logistics by simply announcing his replacement. CNN's Nick Paton Walsh has more from Zaporizhzhia.
NICK PATON WALSH, CNN INTERNATIONAL SECURITY EDITOR (on camera): Well, increasing signs that Ukraine's counteroffensive, something which is of utter strategic importance to them, but they've said they will not announce the beginning of signs that perhaps the prelude of it or even in itself is beginning to get under way.
For the past week, we've heard reports of explosions in the east of occupied Kherson and along the Russian-held bank of the Dnipro River. There have been reports of Ukrainian forces potentially landing in very small numbers is at a distraction, is that something in earnest. Ukraine very keen not to confirm any of these reports or suggest that anything conclusive is under way.
But in the past days, we've seen attacks on Rava-Ruska by Ukrainian strikes, by artillery, possibly taking out key Russian infrastructure, also in Melitopol, another Russian-occupied town, there have been reports of explosions as well.
And on top of that too, Sevastopol, in occupied Crimea, were hit by a drone according to Russia occupying officials there that caused a devastating series of explosions across a vital diesel depot there. That's so important for Russia's Naval presence on that occupied peninsula, enormous damage caused that took hours for firefighters to put out.
And another example of how Ukraine at this point is able to hit vital parts of Russia's supply line in occupied areas. And that will take a heavy toll on its military's ability to function, to push back. We heard a bizarrely-pointed warning from Yevgeny Prigozhin, a very public Russian figure involved in the war, the head of the Wagner Mercenary Group, saying, and I paraphrase here, that they're so low on ammo being supplied around Bakhmut, that symbolic city.
But it potentially risk having to pull back or lessen their forces in there, unless they get a lot more fast, pointing the finger, certainly, again, at Russian Defense chiefs and also warning that there may be a catastrophe if they're not given what they need quickly. Now, he's made obviously these statements before and provided little evidence. But it's bizarre to hear this sort of warning at this particular time when Russia is facing a potentially very decisive Ukrainian military move.
We don't know when it will happen, we don't know where it will happen, but it is certainly beginning to build anticipation and anxiety intention ahead of it. Nick Paton Walsh, CNN, Zaporizhzhia, Ukraine.
ROMANS: All right, this morning, drivers in Cuba are struggling to fill their tanks, a fuel crisis causing Cuba to postpone its annual international Workers Day parade, also known as May Day. CNN's Patrick Oppmann has more from Havana.
OPPMANN (voice-over): It's a country running on empty. Across Cuba right now, more cars seemingly wait online to fill up than drive on the road. Even at stations where there is no gas, people line up for when or if, it finally arrives. For drivers like Elien, the sudden island-wide shortage of fuel means they spend their days trying to fill up rather than working.
"It ain't easy, they sell too little", he says. "Only 40 liters. That only gives me enough for one day." They won't give me more than that. Some people immediately siphon the gas they manage to pump, either to resell or to hoard it as they get back in line all over again. Increasingly, Cubans complain that police are letting too many of what they call indisciplinas(ph), undisciplined behavior take place.
(on camera): What many people do is they save several spots for a car which multiplies many times over how many people are actually in this line waiting for gas. Once the gas actually arrives, so people come rushing back, they cut the line and that's when all hell breaks loose.
(voice-over): As the lines get longer, tempers get shorter. Certain privileged groups like foreign diplomats have their own gas stations assigned to them, but it makes little difference when there's no gas to pump. The Cuban government has said little about the crisis, the worst in years. But acknowledges that there's been disruption of shipments from suppliers like Venezuela, Cuba's socialist ally, who they receive oil from in exchange for medical workers.
JORGE PINON, THE UNIVERSITY OF TEXAS AT AUSTIN ENERGY INSTITUTE: The first domino piece that falls out of this is Venezuela, that it's selling its better-quality crude to those customers that can pay cash. So, the good quality crude that Cuba used to get are no longer there because Cuba doesn't pay cash for crude oil.
OPPMANN: The ripple effects of the gas crunch impact nearly everyone on this island. University classes have been cancelled. Farmers don't have fuel for tractors. There's not enough diesel for garbage trucks to empty dumpsters that overflow with trash. And the Cuban government was forced to cancel the massive parade held every May Day in Cuba's revolution Square.
Usually, the island's top leadership looks on as hundreds of thousands of workers file by. This May Day, officials are encouraging Cubans to march in their own neighborhoods. There simply isn't enough fuel for anything on a large scale. "We will still commemorate May Day", he says, "but rationally and with maximum austerity."
Cuban officials have said the gas shortages will last at least through the end of May. And as frustrating and punishing as this crisis is for Cubans, all people can do is hope and endure their long wait. Patrick Oppmann, CNN, Havana.
ROMANS: All right, quick hits around the globe right now. Pope Francis told journalists on Sunday that the Vatican is part of a mission to end the war in Ukraine. Francis met with a representative from the pro-Kremlin Russian orthodox church during his three-day visit to Budapest.
Santiago Pena is the new president-elect of Paraguay. Pena's victory keeps his conservative Colorado Party in control. The party has dominated the country's political scene for more than 70 years.