Silicon Valley Bank depositors will have access to 'all of their money,' regulators announced
Category: News & Politics
Via: perrie-halpern • 2 weeks ago • 74 commentsBy: Brian Cheung and Rob Wile
S E E D E D C O N T E N T
Federal regulators stepped in Sunday to back all Silicon Valley Bank deposits, resolving a key uncertainty surrounding the second-largest bank failure in U.S. history hours before global stock markets resumed trading.
The U.S. Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. said the government would back Silicon Valley Bank deposits beyond the federally insured ceiling of $250,000. The decision addressed concerns around the fate of uninsured funds held at the Santa Clara, California-based bank — the country's 16th largest — which had $209 billion in assets and more than $175 billion in deposits.
"Depositors will have access to all of their money starting Monday, March 13," the agencies said in a joint statement Sunday evening. "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."
Senior management of SVB will be removed, the statement said.
The announcement marks an extraordinary step by federal regulators to calm financial markets before Monday trading resumed in Asia and Europe, followed by North America. Dow futures jumped more than 150 points Sunday night following news of the backstop plan.
Major markets in the Asia-Pacific region were mixed on Monday morning, with Japan's Topix recording the biggest loss at about 2%. Banks such as HSBC, Standard Chartered and DBS were down as much as 1.06% as of midday amid fears of contagion.
President Joe Biden said late Sunday that he was pleased.
"The American people and American businesses can have confidence that their bank deposits will be there when they need them," he said in a statement. "I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again."
He said he would speak more about banking security Monday morning.
Some Silicon Valley Bank customers and staffers breathed sighs of relief after the regulators' announcement.
Vanessa Pham said she was preparing for the possibility that Omsom, the Asian food products business she co-founded that banks with SVB, might run out of money within anywhere from two weeks to three months.
"I will be patiently, eagerly waiting the actual deposit in our bank and our access with it," Pham said.
A source inside Silicon Valley Bank who worked as a managing director in a regional office before Friday's shutdown said he was happy for his clients. He welcomed what he called a "favorable resolution," adding that he feared tens of thousands of jobs could have been lost if uninsured deposits were not covered.
A second SVB employee said Sunday, "The feeling that clients were going to lose money and that they were facing all this disruption on our behalf I think crushed people. So now they're at least going to be made whole for their deposits, which is a huge sense of relief."
The employee added that while depositors have been guaranteed, the bank's employees — who SVB has said number more than 8,500 — face doubts about their jobs: "There's still a lot of uncertainty. Management was just fired as a part of that, and we still might get bought."
Federal regulators also said Sunday that they took control of a second bank, New York's Signature Bank, which is roughly half the size of SVB and had become a hub for cryptocurrency financing. They said a similar guarantee for Signature Bank depositors would be instituted in the process of shutting it down.
A senior Treasury official told reporters Sunday that regulators are watching other banks that may have similar issues. As part of coordinated interagency efforts to backstop any further bank failures, the Fed has set up an emergency lending program to give banks expanded and quick access to funds "in times of stress."
The official also did not rule out the possibility of finding a buyer for either SVB or Signature Bank.
A federal guarantee for SVB depositors was the hoped-for solution among tech industry players and pundits calling for a rescue of the bank's corporate and startup clients, many of whom had all but frozen their operations in anticipation of what would come next for a bank that held much of their assets.
The intervention forced Washington officials to invoke a "systemic risk exception," an extraordinary measure allowing financial regulators to step in without congressional action. The move required joint approval from the Federal Reserve, the FDIC and the Treasury in consultation with Biden.
Banking officials in the United Kingdom were watching the situation with thoughts of their own technology economy.
"You know, there's been a lot of concern because Silicon Valley Bank in the UK, like in the U.S., is very important to a large number of technology companies, which obviously employ many people in high skilled jobs," British Prime Minister Rishi Sunak told NBC News's Lester Holt on Sunday evening.
He said his government was determined to support the well being of the UK tech sector and "hopefully, we'll announce those plans relatively soon. "
Tags
Who is online
30 visitors
Thankfully Biden took care of of the venture capitalists and tech moguls.
Proving once again that Biden is not a leftist or a progressive.
But your pipedream that a Republican president would have done differently is humorous.
He's a national socialist, which is why progressives and leftists seem to almost uniformly support this. This is corporatism in action.
Nope. These banks were selling off their shares before going belly up.
They were woke companies, Thus the question:
Will Biden's woke DOJ go after them?
Define "woke" in this context.
It's a pretty simple idea really. You liquidate the $209B in assets, pay the depositors their $175B that is theirs, and the rest goes to pay creditors. It's a win for everybody except for the bank execs who caused this mess to begin with. Thanks to Joe and Janet.
Yep, unless of course you were a customer with more than 250k in deposits. Which is a lot of small businesses.
I read somewhere that 94% of their deposits were uninsured by FDIC where most banks are closer to 50%.
Not good, not good at all.
Did you read the same article that I did?
Promises, promises. They’ll say anything to avoid a panic, which is good but I’ll believe the over 250k thing when it actually happens
Didn't Biden say that no taxpayer dollars were going to be used on this?
Where does the government get the money?
From premiums. Do you know how insurance works?
The premiums that capped liability at 250K?
Yes. Do you know how taxes work?
Do the premiums include those deposits that exceed the $250,000 insured deposits?
For anything over the 250k the government will make them sell off their assets to repay depositors. They have $250 billion in assets. It will cover the depositors. It will also cover some of their liabilities. In a perfect world it would leave the rich assholes that caused this mess penniless.
Yes, I do.
I know that if you take out a life insurance policy on your wife for 250K and she dies, you ain't getting 750k from the insurance company.
More accurately, he took care of their workers.
The fact that most of them tend to vote Democrat is entirely beside the point, I'm sure.....
It was the correct thing to do and the US taxpayer isn't on the hook for any of the monies. The execs and shareholders in SVB will suffer the loss and the FDIC will recoup the monies through increased premiums on the banks.
The Bank of London has made an offer to take over the SVB London operation.
Right. If the US government won't look out for the Mitt Romney's of the world, who will? We can all sleep better knowing Bain Capital won't suffer any losses. Just like the US Government steps in to ensure Tom the Carpenter doesn't suffer any losses when he doesn't have enough insurance to make him whole.
e US taxpayer isn't on the hook for any of the monies
Yeah, creating a new precedent of unlimited guarantees on deposits no matter how certainly won't come back to bite. If there's one thing we know, its bailouts teach businesses to avoid risk.
recoup the monies through increased premiums on the banks
So not taxpayers, just the few Americans who use banks.
If Mitt Romney puts his money in the bank shouldn't he be allowed to withdraw it if he wants to?
I don't use banks. Back in 2008 during the last greed fed banking fiasco, when banks were taking taxpayer money and using it to pay bonuses to their executives, I withdrew all my business from the bank and deposited it into small, local, depositor owned and non-profit credit unions. Now instead of paying fees for everything I get dividends.
I'm not sure it's actually a bailout.
It's almost surely going to end up as a forced sale/merger. HSBC has already been lined up to take over the UK division. We will probably see Chase or BoA or some huge US bank take over US operations within the next few days. They have more assets than deposits, so it's not like there isn't any money to distribute.
It's reportedly more of a cash flow crisi, brought about in part by owning too many US Govt bonds, which are generally not considered risky assets.
The management has already been fired.
So it seems more like a "you fucked up, so we're going to feed you to your larger competitors before you cost us money" situation.
I think you got it right Jack.
We can add Signature Bank to the list and blame then for being too heavy in "crypto assets".
And a very familiar name on that Board.
Barney Frank ... Mr congressional bank regulator.
Doh!
Barney will become a pariah to Democrats now that he has said the 2018 law had no effect on what happened to these 2 banks, contradicting some prominent Dems.
Did Tom the Carpenter lose any money?
Yes, it is unprecedented but what is your solution? Do you have one?
That has been part of FDIC for decades.
Of course he can. Do you think insurance covers every loss? If Tom had a policy for $250,000 on property that costs $300,000 does the government make him whole?
If he had 300,000 in say the First Topeka Bank when it failed will the government make him whole?
Why does it for Venture Capitalists?
Yes, it is unprecedented but what is your solution? Do you have one?
Let the system work as it was designed to.
. That has been part of FDIC for decades.
I have no idea what you are talking about.
I asked if he did lose money not if he can. In this instance, everyone got protected, from $1 dollar on deposit to all above $250,000. So Tom got covered.
Excellent, Sean. Feel free to contact Yellen et all and put forth your idea.
That the feds have been having the bank deposit premiums for FDIC coverage.
Since this isn't near the coverage that would occur if say and JP Morgan went under I am sure that your reaction to their rescue would be ''hair on fire''.
You think this bank only serves venture capitalists? This plan will help Tom the carpenter too. Just like it's helping Vanessa Pham who is mentioned in the article. This was clearly a crisis for many of these depositors for whom even waiting for the insurance payout could be catastrophic for their businesses. It looks like it's going to be resolved relatively painlessly now. I know you were hoping for a train wreck to blame Biden for but he's outsmarted you again.
And that's a strawman!
Feel free to contact Yellen et all and put forth your idea
My bad. You asked a question and I answered it.
hat the feds have been having the bank deposit premiums for FDIC coverage.
No shit. You keep responding with statements that have nothing to do with what I wrote. Do you imagine I claimed something else? Or do I need to explain every assumption that I think informed people already understand?
Really? How would it have helped the small businessmen at the last regional bank that closed (happens regularly) with deposits in excess of insurance.
Imagine arguing that its mainly small businesses banking at a Bank for venture capitalists. It's amazing how well cherry picking a single client works to misinform people.
So the Feds are going to pay back all the small businesses who performed services for the bank and are owed money?
I know you were hoping for a train wreck to blame Biden for but he's outsmarted you again.
I know you were hoping for a train wreck to blame Biden for but he's outsmarted you again.
I get all BIden cares about is propping up the economy for another 18 months. If you think creating yet another moral hazard counts for massive corporations counts as "outsmarting" someone you are being bamboozled. I actually care about what this precedent means for our country going forward, unlike yourself who just wants to "own the cons"
Said no one, ever, truthfully.
LOL, are you counting yourself as one of the ''informed''?
One of the bank depositors was Etsy - they stopped paying their customers on Friday. Hopefully now those mom and pop stores will be made whole again.
That's why I use more than 1 credit union. Money in credit unions is also insured, not by the FDIC but by the NCUA. It's a similar setup with a $250k limit.
And another woke gone and another woke gone
Another woke bites the dust .....
Another cerebral contribution ?
Thx, I thought so as well.
It’s always nice to get helpful feedback from our friends on the left.
He's giving DeSantis competition for most utterances of "woke' in the Guiness record book.
More press from my friends on the left.
Thx again for making me the topic.
Anytime, just keep posting those unimaginative 'gems'.
Opinions do vary but haters always gotta hate so ..... carry on .....
Speaking of moral hazards, Bitcoin is up 18.6% in the last 24 hours.
The market knows what lesson to take from this bailout.
So with the US Treasury now backstopping 20 trillion dollars in deposits there's no way something can go wrong.
Regardless, Biden will still blame Trump for any bad news while taking all credit for the good.
Welcome to any election ever.
Can’t argue with that but Biden takes it to a new level.
Silicon Valley Bank collapse puts new spotlight on Trump banking law (msn.com)
Just like the 'relaxing' of regulations and that derailment, there was also another derailment recently by the same company.
They're all so eager to blame Biden yet this all happened on the former 'president's' watch.
Does it also put a spotlight on the Democrats who co-sponsored the bill? It was a bill started in the Senate, had 26 total co-sponsors and passed both the House and the Senate with bipartisan votes. But hey, why break a good playbook. When it looks bad for your re-election blame the prior administration.
Always defending the indefensible.
Were the several Democrats Sinema and Manchin?
Not if they can just blame Trump for the bipartisan legislation.
Mark doesn’t know how to use hyperbole:
Yea, one was Sinema but she was a House Rep then.
Bipartisan legislation.
No spinning will ever make this Trump's fault.
Why, yes, yes it does. they appear to have all caved to Wall Street's belief that Frank Dodd was a knee jerk reaction to 2008.
Maybe they don't buy into "the buck stops with the last guy".
You're talking about people who still blame W for the 2008 housing crisis... enabled by a bipartisan law Clinton signed.
What specific provisions in the "Trump banking law" would have prevented this bank failure?
Barney Frank is defending the law he voted for even still today. He said it had no effect on the two bank closings.
Really? Well that IS interesting.
I'm wondering if any of the folks here who seem convinced this was all Trump's fault can tell us what exactly happened that would have been prevented. Or indeed what the law said. Or what Dodd Frank said. Or what Gramm Leach Bliley said. Or how a bank can lose money invested in US Treasury bonds. Or the difference between a savings account and a money market fund. Or how much their brokerage accounts are insured for, by whom, and against what.
I'm sure they understand all of those things, given their fervent opinions on this situation.
Silvergate Bank failed first. Heavily invested in the next big thing, crypto.
Then SVB. The Tech industry bank.
Then Signature. Also too invested in Crypto.
None of them would have been allowed to take on great risk under Dodd Frank.
They did not diversify.
They gambled with investors and depositors $$ violating the first rule of banking.
I am guessing that Tester and others are now grateful they were not invited to the signing.
Sometimes it seems like a cycle of financial bubbles that burst and the appearance of GOP led charge decades later to overturn the "onerous laws" only to have another financial crisis repeat the same cycle.
Now Warren, Sanders et al will probably prevail in reinstating some of Dodd Frank, maybe...
What would you rather have, sound financial regulation or book bannings and bathroom laws or drag queen contests banned...
Seems like we need to get our collective priorities together under the protection of the Constitution.
Just my opinion.
None of Silvergate Bank's money was invested in crypto.
Who experienced a run because their super large, super stable customers were worried about having so much money uninsured.
Again, not invested in crypto. Again, caught in a run because another bank had difficulty.
Silvergate and Signature provided bank accounts where people who did invest in crypto could store their money in USD.
SVB invested depositor money in US Treasuries. It's not like they were buying credit default swaps on faulty mortgages.
Barney Frank himself (the "Frank" of "Dodd-Frank") said Signature was liquid, so I'm not sure Dodd-Frank was the security blanket some people imagine.
Forbes and others disagree.
You can argue what "too invested in crypto" means,
but bank panics aren't driven by facts
they are driven by misconception and fear.
Disagree with what, precisely?
Silvergate's business model was to pay depositors almost no interest, then invest those deposits into highly stable assets...like govt bonds. They attracted depositors because they were one of the only banks that would allow people to move money in and out of crypto exchanges.
None of their money was invested in crypto. None of their deposits were invested in crypto. They were the place people kept their money before and after they traded crypto.
When FTX went under, lots of people realized that crypto was only ever a huge scam and took their money out, creating a run on the bank. When Silvergate went under, tech industry depositors in SVB panicked and created a run on that bank, which then bled to Signature.
There is nothing in Dodd-Frank about crypto. There is nothing in Dodd-Frank prohibiting banks from investing deposits in US Treasuries. There is nothing in Dodd-Frank that prohibits a bank from having huge, highly stable clients from the same industry.
There IS a provision in the FDIC Improvement Act (1991) which allows/requires regulators to step in quickly to keep FDIC claims at a minimum... which they have done... which is why only the shareholders are losing any money. So the regulations we have are working the way they are supposed to.
If you want to talk about a failure of regulation, fine. Talk about the failure to understand or regulate or even acknowledge cryptocurrency as it became a trillion-dollar house of cards, and how we allowed one guy to steal $9 billion.
Then let's talk about the congresspeople tasked with oversight of banks who can't do basic math on their whiteboard when questioning bank CEOs, or who don't understand the difference between the fed funds rate and the discount rate. Then let's discuss whether or not we trust people with such limited understanding of their own money to make any sort of effective policy regarding yours or mine.
Had these banks still been covered by Dodd Frank would they have passed the mandatory stress tests?
Yes or no?
Welcome to America where folks like failed restauranters and college bartenders can get elected to Congress and assigned to committees.
Yes.
*sigh*
I know.....
I know......
WTF are we doing?
The article says "probably".
This article says that they were just about even, maybe, but what killed them was their client base who all had the same habits and the same social networks.
They catered to the venture capitalists and expected some loyalty in return.
Turns out that techies and VCs panic just like everyone else.
Exactly. And Dodd-Frank would not have prevented that.
I'm not saying they made good decisions. I am saying that blaming Trump for all this is silly.
There is plenty to blame Trump for. But this idea that we just blanketly blame the orange boogeyman for anything and everything that ever goes wrong is just ridiculous. These people sound like a bunch of Southern Baptists blaming the devil for their flat tire. It's just dumb.
The buck never stops with Biden
Why, yes, yes it does. They appear to have all caved to Wall Street's belief that Dodd Frank
was a knee jerk reaction to 2008.
SVB and Signature were among the Banks lobbying for relief.
Go figure...
Once again, banks need to be tightly regulated. Every time the leash is loosened this kinds shit starts happening.
Yep and former congressman should not be allowed to serve on any bank board if they were involved in any major banking legislation.