The government’s reliance on JPMorgan Chase as the white knight to take over failed First Republic Bank reveals the rot at the core of both the banking system and the bank regulatory system. For decades, regulators have allowed one bank merger after another, allowing the biggest banks to get bigger, while failing to supervise the kind of risks that ultimately caused First Republic to crash.

JPMorgan Chase, the nation’s largest bank, with $2.47 trillion, or over 10 percent of all U.S. deposits, will now be even bigger. Morgan acquires about $212.6 billion of First Republic’s loans and $92.4 billion in deposits. JPMorgan CEO Jamie Dimon has said the bank would book a one-time profit of $2.6 billion.

Under the acquisition deal approved May 1 by the Office of the Comptroller of the Currency (OCC), JPMorgan’s primary regulator, the bank will not have to assume any of First Republic’s debt; it will get $50 billion in financing from the FDIC, which will also guarantee 80 percent of any losses that Morgan incurs in taking over First Republic’s portfolio of mortgage loans.

In approving the takeover, acting Comptroller Michael Hsu wrongly certified that the deal would not add to the risks in the stability of the banking system, and he waived concerns that it would increase bank concentration. OCC had the sole authority to certify that the acquisition was in the public interest, and that a 1994 law limiting any one bank to under 10 percent of all U.S. deposits could be waived. In other words, Hsu could have stopped the merger, and forced the FDIC to consider smaller suitors. He did not.

Hsu is one of the officials in charge of rewriting bank merger guidelines. He has now shown his hand as being just fine with more concentration.

The deal raises several questions, which I will address in more detail in my next post. Where were the other regulators? I’m told that at least one raised serious objections. The deal Hsu blessed with JPMorgan committed FDIC funds. Did the FDIC go along willingly? And three other banks had expressed interest in acquiring First Republic. Why was that alternative not taken seriously?

This pattern of looking for white knights among other behemoth banks became part of the government’s playbook during the 2008 financial collapse. During that crisis, JPMorgan bought failing investment bank Bear Stearns for $1.4 billion with funds from the Federal Reserve, as well as much of failed lender Washington Mutual for $1.9 billion.

The pattern continued in the Obama administration’s response to the collapse, which bailed out the biggest banks with no losses to shareholders or changes to management, leaving the biggest banks bigger and more concentrated than ever.

Call me a socialist, but if the government is going to put out all this money to enable JPMorgan to take over a failed bank, the government might as well just own the bank directly.

"The failure of First Republic Bank shows how deregulation has made the too big to fail problem even worse," Sen. Elizabeth Warren (D-MA) said in a tweet. "A poorly supervised bank was snapped up by an even bigger bank—ultimately taxpayers will be on the hook. Congress needs to make major reforms to fix a broken banking system."

Amen to that.