General Motors Company (GM)’s First Big Buy and a Dubious Financial Record

During the first quarter of 1988, widening fears of insolvency among the bank’s depositors led to nearly $2 billion in outflows, forcing the bank to borrow $2.6 billion from the Dallas Fed to stay operational. Shortly thereafter, the bank received another $1 billion in short-term loans as part of a March assistance plan. Following First Republic’s failure, the FDIC sold its assets to the North Carolina National Bank, which became NationsBank in 1991. The FDIC’s estimated total cost of $3.9 billion for the failed bailouts became the costliest resolution in history to that time. Despite later downward revisions to a total loss of $3 billion, it would remain the largest loss for taxpayers until the collapse of IndyMac Bank in 2008 set a new record of $8 billion in lost FDIC funds.

NationsBank, which acquired First Republic’s assets, went on to become Bank of America Corp (NYSE:BAC) in 1998 when it acquired San Francisco’s BankAmerica. Bank of America Corp (NYSE:BAC), interestingly enough, had bought the assets of the largest failed bank in American history prior to the financial crisis: Continental Illinois National Bank and Trust, which held approximately $40 billion in assets when it was seized by federal regulators in 1984 to prevent a bank run.

The article GM’s First Big Buy and a Dubious Financial Record originally appeared on Fool.com and is written by Alex Planes.

Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Bank of America and General Motors. The Motley Fool owns shares of Bank of America.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.