U.S. says ‘all’ deposits at failed bank will be available Monday
S E E D E D C O N T E N T
The Biden administration announced Sunday night that all depositors at the failed Silicon Valley Bank would have access to all their money on Monday morning, approving an extraordinary intervention aimed at averting a crisis in the financial markets.
The decision by Treasury to backstop all of SVB’s deposits — not just those up to $250,000 that are automatically insured under federal law — will likely ignite a political firestorm over the decision to protect the assets of tech firms, venture capitalists, and other rich people in California.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” a joint statement from the Treasury Department, the Fed and the Federal Deposit Insurance Corporation said. “This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”
On a call with reporters on Sunday evening, a senior Treasury official defended the administration’s decision as necessary to protect the stability of the banking system and emphasized that the move was aimed at protecting companies and workers who could be harmed by the bank’s collapse — not the bank’s shareholders or executives. The official spoke on the condition of anonymity to speak about internal deliberations, under the conditions of the call.
The Treasury official also said the decision to protect all deposits was made following a recommendation by the Federal Deposit Insurance Corporation and the Federal Reserve, the nation’s top banking regulators. President Biden was also consulted on the announcement.
Treasury Secretary Janet L. Yellen stressed in a statement that taxpayers would bear none of the burden of protecting the depositors. Their funds will be backstopped by a pool of money that is regularly paid into by U.S. banks, which currently has more than $100 billion in it.
The new Fed program will enable banks to pledge U.S. Treasuries and other safe government securities as collateral in return for loans of up to one year from the central bank.
The initiative is aimed at resolving one of the problems that led to SVB’s failure: unrealized losses on government securities that the bank owned. As the Fed raised interest rates last year, the value of those securities fell.
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Another bailout for billionaires.
Jus this morning Yellen said there would be no bailout, but her bosses disproved. Never doubt who the Biden Admisntration works for.
The lesson as always, banks can be as reckless as they want with no risk.
Moral Hazard:
You are correct. Kudos.
FDIC insuring deposits is not baling out bank!
Its a bailout of the companies and millionaires who took advantage of a lax bank with shitty underwriting and won't suffer any consequences.
The FDIC regulations are being ignored because of the clout and political connections of the depositors.
But more than just FDIC-covered assets are going to be covered. This will cover ALL deposits, including those that were much larger than the FDIC-covered $250,000.
EXCEPT, The bank is shut down and the owners and shareholders lost everything meaning, THIS IS NOT A BANK BAILOUT!
Wrong again.
But keep digging.
But I am not lying. SVB wasn't bailed out.
That bank was shut down by regulators...
Biden is out there right now saying that he will protect depositors and screw the investors.
Marx would be so proud of this POS
You are proving my point. The bank is not receiving a bailout. The owners lost their investment in the bank, not depositors ..
It is a bailout of the elite. These banks made billions.
How much of the deposits in those banks were above $250,000 per individual?
The vast majority of deposits per individual in those banks were above that.
SVB was closed. SVB was not bailed out!
Owners and stockholders are wiped out...
You seem to think that if we had a Republican administration billionaires wouldnt be bailed out. I find that hilarious.
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At least their Risk Management Director will have more time to focus on her DEI obsession instead of the bank's balance books, which is apparently what's she been doing the whole time anyway.
So the Hedge Funders and Venture Capitalist, whose ill-discipline engineered this thing, are going to be covered? Why? Most of these folk have accounts running into the millions.
Where is it written that it is the responsibility of the taxpayer to underwrite and maintain the status quo of the wealthy upper economic eschelon?
Rules only apply to the powerless.
The $250,000 cap that is supposed to apply is just a joke for some.
A couple of things some direct from the article
That sure sounds like BS since the coffee company in D.C. and the medical records company in NY are not in California. Of course, the London Branch of the SVB has the UK scrambling to protect them as well and there are suitors lined up to take over the SVB business in the UK.
Seems not everyone is protected.
It looks like the taxpayers aren't going to be on the hook for this decision.
What reckless behavior did SVB engage in? Buying US treasury bills?
Most tech money is in California. If you can show otherwise, please correct the Washington Post.
o ndon Branch of the SVB has the UK scrambling to protect them as well and there are suitors lined up to take over the SVB business in the UK.
Having done a few hours of due diligence, no American banks were willing to touch it.
Seems not everyone is protected.
But those who benefited from a bank taking risks that others wouldn't and kept more than $250,000 there are. The cleaning companies that literally cleaned the banks, aren't. Not enough clout.
What reckless behavior did SVB engage in? Buying US treasury bills?
As pretty much every article written on the subject the last few days has noted, they bet way too much on interest rates remaining low and “there was a lot of risk they were taking on that other banks wouldn’t,” said Sarah Kunst, a managing director at venture capital fund Cleo Capital. “That ultimately was part of their demise.”
This is a transcript of a good podcast about SVB and its mistakes - some were risky things like depending on venture capitalists to keep them liquid, some were bad luck (the failure of Silvergate, which is a crypto bank), and some was clumsy PR - announcing that they needed to raise money by selling shares.
Sean, let me know if the above post is too long, and I'll delete all but the link.
The classic run on the bank is what destroyed it. $42 billion in one day did them in.
I understand that they were stuck with low paying treasuries that they sold at a huge loss to try to cover the withdrawals.
The bank run destroyed them. But they made some unwise decisions leading to that run. Their cash balances were maintained by companies that weren't doing very well, who were drawing down their savings. They pretty much advertised they were in trouble by sending out a fundraising letter.
And some was just bad luck - the increase in rates paid on treasury bonds.
I already did.
Do you have a link for that? If so why are UK companies lined up for the chance to take it over?
I simply pointed out what the article said, you can spin that any way you want.
Yeah, they didn't protect the treasuries by doing futures, which was a mistake on their part.
Once the loans were granted it was part of SVB deal that they had to keep their deposits in SVB. They specialized in the start up industry so it would seem natural that that would be the majority of their loans. I haven't seen their underwriting standards, have you? It would be interesting to see them, wouldn't it?
The fact remains that the taxpayers isn't going to be on the hook for the money.
I've read elsewhere that the execs were paid bonuses hours before SVB was taken over.
I understand that it was more than just the execs plus the fact that the CEO sold over $3 million in stock a few weeks before their downfall.
I'm wondering if any laws here were broken here? The CEO and other execs shouldn't be allowed to run another bank at the very least.
I don't know if any laws were broken, but if they were then punish them to the full extent of the law.
Will it be 2008 all over again?
As we all remember it was the financial crisis that put Obama in the White House.