Lawmakers and regulators have spent years erecting legal guidelines and guidelines meant to restrict the facility and measurement of the biggest U.S. banks. However these efforts had been forged apart in a frantic late-night effort by authorities officers to comprise a banking disaster by seizing and promoting First Republic Financial institution to the nation’s largest financial institution, JPMorgan Chase.

At about 1 a.m. Monday, hours after the Federal Deposit Insurance coverage Company had been anticipated to announce a purchaser for the troubled regional lender, authorities officers knowledgeable JPMorgan executives that they’d gained the best to take over First Republic and the accounts of its well-heeled prospects, most of them in rich coastal cities and suburbs.

The F.D.I.C.’s determination seems, for now, to have quelled practically two months of simmering turmoil within the banking sector that adopted the sudden collapse of Silicon Valley Financial institution and Signature Financial institution in early March. “This a part of the disaster is over,” Jamie Dimon, JPMorgan’s chief govt, advised analysts on Monday in a convention name to debate the acquisition.

For Mr. Dimon, it was a reprise of his position within the 2008 monetary disaster when JPMorgan acquired Bear Stearns and Washington Mutual on the behest of federal regulators.

However the decision of First Republic has additionally delivered to the fore long-running debates about whether or not some banks have grow to be too huge too fail partly as a result of regulators have allowed and even inspired them to accumulate smaller monetary establishments, particularly throughout crises.

“Regulators view them as adults and enterprise companions,” mentioned Tyler Gellasch, president of Wholesome Markets Affiliation, a Washington-based group that advocates better transparency within the monetary system, referring to huge banks like JPMorgan. “They’re too huge to fail and they’re afforded the privilege of being so.”

He added that JPMorgan was more likely to make some huge cash from the acquisition. JPMorgan mentioned on Monday that it anticipated the deal to lift its income this 12 months by $500 million.

JPMorgan pays the F.D.I.C. $10.6 billion to accumulate First Republic. The federal government company expects to cowl a lack of about $13 billion on First Republic’s belongings.`

Usually a financial institution can not purchase one other financial institution if doing so would permit it to manage greater than 10 p.c of the nation’s financial institution deposits — a threshold JPMorgan had already reached earlier than shopping for First Republic. However the regulation consists of an exception for the acquisition of a failing financial institution.

The F.D.I.C. sounded out banks to see if they might be keen to take First Republic’s uninsured deposits and if their major regulator would permit them to take action, based on two folks acquainted with the method. On Friday afternoon, the regulator invited the banks right into a digital knowledge room to have a look at First Republic’s financials, the 2 folks mentioned.

The federal government company, which was working with the funding financial institution Guggenheim Securities, had loads of time to arrange for the public sale. First Republic had been struggling because the failure of Silicon Valley Financial institution, regardless of receiving a $30 billion lifeline in March from 11 of the nation’s largest banks, an effort led by Mr. Dimon of JPMorgan.

By the afternoon of April 24, it had turned more and more clear that First Republic couldn’t stand by itself. That day, the financial institution revealed in its quarterly earnings report that it had misplaced $102 billion in buyer deposits within the final weeks of March, or greater than half what it had on the finish of December.

Forward of the earnings launch, First Republic’s attorneys and different advisers advised the financial institution’s senior executives to not reply any questions on the corporate’s convention name, based on an individual briefed on the matter, due to the financial institution’s dire scenario.

The revelations within the report and the executives’ silence spooked traders, who dumped its already beaten-down inventory.

When the F.D.I.C. started the method to promote First Republic, a number of bidders together with PNC Monetary Providers, Fifth Third Bancorp, Residents Monetary Group and JPMorgan expressed an curiosity. Analysts and executives at these banks started going via First Republic’s knowledge to determine how a lot they might be keen to bid and submitted bids by early afternoon Sunday.

Regulators and Guggenheim then returned to the 4 bidders, asking them for his or her greatest and remaining affords by 7 p.m. E.T. Every financial institution, together with JPMorgan Chase, improved its provide, two of the folks mentioned.

Regulators had indicated that they deliberate to announce a winner by 8 p.m., earlier than markets in Asia opened. PNC executives had spent a lot of the weekend on the financial institution’s Pittsburgh headquarters placing collectively its bid. Executives at Residents, which relies in Windfall, R.I., gathered in workplaces in Connecticut and Massachusetts.

However 8 p.m. rolled by with no phrase from the F.D.I.C. A number of hours of silence adopted.

For the three smaller banks, the deal would have been transformative, giving them a a lot larger presence in rich locations just like the San Francisco Bay Space and New York Metropolis. PNC, which is the sixth-largest U.S. financial institution, would have bolstered its place to problem the nation’s 4 giant business lenders — JPMorgan, Financial institution of America, Citigroup and Wells Fargo.

Finally, JPMorgan not solely provided more cash than others and agreed to purchase the overwhelming majority of the financial institution, two folks acquainted with the method mentioned. Regulators additionally had been extra inclined to just accept the financial institution’s provide as a result of JPMorgan was more likely to have a neater time integrating First Republic’s branches into its enterprise and managing the smaller financial institution’s loans and mortgages both by holding onto them or promoting them, the 2 folks mentioned.

Because the executives on the smaller banks waited for his or her telephones to ring, the F.D.I.C. and its advisers continued to barter with Mr. Dimon and his group, who had been searching for assurances that the federal government would safeguard JPMorgan in opposition to losses, based on one of many folks.

At round 3 a.m., the F.D.I.C. introduced that JPMorgan would purchase First Republic.

An F.D.I.C. spokesman declined to touch upon different bidders. In its assertion, the company mentioned, “The decision of First Republic Financial institution concerned a extremely aggressive bidding course of and resulted in a transaction in line with the least-cost necessities of the Federal Deposit Insurance coverage Act.”

The announcement was extensively praised within the monetary business. Robin Vince, the president and chief govt of Financial institution of New York Mellon, mentioned in an interview that it felt “like a cloud has been lifted.”

Some monetary analysts cautioned that the celebrations is likely to be overdone.

Many banks nonetheless have a whole bunch of billions of {dollars} in unrealized losses on Treasury bonds and mortgage-backed securities bought when rates of interest had been very low. A few of these bond investments are actually value a lot much less as a result of the Federal Reserve has sharply raised charges to deliver down inflation.

Christopher Whalen of Whalen World Advisors mentioned the Fed fueled a number of the issues at banks like First Republic with a straightforward cash coverage that led them to load up on bonds that are actually performing poorly. “This drawback won’t go away till the Fed drops rates of interest,” he mentioned. “In any other case, we’ll see extra banks fail.”

However Mr. Whalen’s view is a minority opinion. The rising consensus is that the failures of Silicon Valley, Signature and now First Republic won’t result in a repeat of the 2008 monetary disaster that introduced down Bear Stearns, Lehman Brothers and Washington Mutual.

The belongings of the three banks that failed this 12 months are better than of the 25 banks that failed in 2008 after adjusting for inflation. However 465 banks failed in whole from 2008 to 2012.

One unresolved challenge is tips on how to take care of banks that also have a excessive share of uninsured deposits — cash from prospects nicely in extra of the $250,000 federally insured cap on deposits. The F.D.I.C. on Monday really useful that Congress think about increasing its means to guard deposits.

Many traders and depositors are already assuming that the federal government will step in to guard all deposits at any failing establishment by invoking a systemic danger exception — one thing they did with Silicon Valley Financial institution and Signature Financial institution. However that’s simple to do when it’s only a few banks that run into bother and harder if many banks have issues.

One other looming concern is that midsize banks will pull again on lending to protect capital if they’re topic to the type of financial institution runs that befell at Silicon Valley Financial institution and First Republic. Depositors may also transfer their financial savings to cash market funds, which have a tendency to supply increased returns than financial savings or checking accounts.

Midsize banks additionally have to brace for extra exacting oversight from the Fed and the F.D.I.C., which criticized themselves in reviews launched final week in regards to the financial institution failures in March.

Regional and group banks are the principle supply of financing for the business actual property business, which encompasses workplace buildings, house complexes and buying facilities. An unwillingness by banks to lend to builders might stymie plans for brand new building.

Any pullback in lending might result in a slowdown in financial development or a recession.

Some specialists mentioned that regardless of these challenges and issues about huge banks getting larger, regulators have finished an admirable job in restoring stability to the monetary system.

“It was a particularly troublesome scenario, and given how troublesome it was, I feel it was nicely finished,” mentioned Sheila Bair, who was chair of the F.D.I.C. in the course of the 2008 monetary disaster. “It signifies that huge banks turning into larger when smaller banks start to fail is inevitable,” she added.

Reporting was contributed by Emily Flitter, Alan Rappeport, Rob Copeland and Jeanna Smialek.