This past weekend, all eyes were on banking and the Silicon Valley Bank, a famous bank for entrepreneurs in Santa Clara, California.
Early on Friday, the bank was taken under the jurisdiction of the Federal Deposit Insurance Corporation. Meanwhile, the head of the Federal Reserve, Jerome H. Powell, warned legislators last Tuesday that the central bank could have to raise interest rates more than it planned, and maybe at a faster clip in order to try and reign in inflation.
Authorities halted SVB on Friday after it underwent a conventional bank run.
It is the second greatest bank collapse in U.S. history, second only to Washington Mutual’s 2008 meltdown.
When the SVB fell, officials attempted to find a buyer for the bank, which had more than $200 billion in assets and catered to software companies, venture capital firms, and well-paid technology employees as far afield as the UK and China.
Enter the government bailout. At initially, it was claimed that the $250,000 insurance limit would cover money for customers of the bank up to that amount. The Treasury Department and Federal Reserve subsequently declared that they would insure ALL bank funds.
In an extraordinary step on Sunday night, they have now issued a joint statement announcing that they will compensate all depositors in full, regardless of the typical $250,000 FDIC limit.
@federalreserve @USTreasury @FDICgov issue statement on actions to protect the U.S. economy by strengthening public confidence in our banking system, ensuring depositors' savings remain safe: https://t.co/YISeTdFPrO
— Federal Reserve (@federalreserve) March 12, 2023
This is the whole Federal Reserve news release:
Washington, District of Columbia — Treasury Secretary Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg issued the following statement:
Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. 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.
After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.
We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.
More on this story via The Republic Brief:
The Biden White House is taking ownership of the situation, once more delving into private enterprise at the expense of the taxpayers. A White House statement early this morning said, “The president will tell Americans they can have confidence that our banking system is safe, and their deposits will be there when they need them.” Biden is scheduled to say more on the matter this morning. CONTINUE READING…