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Biden Admin Makes Major Announcement After Silicon Valley Bank Collapse

Banking regulators announced an emergency measure on Sunday to fully protect deposits at Silicon Valley Bank, a critical move in averting a panic over the bank’s collapse.

U.S. Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) have revealed the plan in a joint statement.

“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” the statement read.

Treasury Secretary Janet Yellen, after consulting with the president and regulators, has authorized the plan that “fully protects all depositors.”

Currently, the maximum amount of protection provided by the FDIC to any one depositor is $250,000. However, under the new plan, all deposits, both insured and uninsured, will be protected.

“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,” according to the statement.

“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.”

Regulators also announced a similar measure for New York-based Signature Bank, which was closed on Sunday by the state chartering authority.

“All depositors of this institution will be made whole,” the joint statement said.

In addition, the Fed announced on Sunday that it will make extra funding available to eligible depository institutions to help ensure banks can satisfy the requirements of all their depositors.

“The Federal Reserve is prepared to address any liquidity pressures that may arise,” the Fed’s statement said.

As part of the efforts to avert a banking crisis, the central bank announced the establishment of a new Bank Term Funding Program (BTFP) targeted at protecting deposits at failed institutions.

The Treasury Department will “make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP,” the central bank announced.

SVB Collapse

The collapse of Silicon Valley Bank (SVB) has created uncertainty among tech investors and startups who had large exposure to the bank. Founded in 1983, the Santa Clara, California-based bank was a top Silicon Valley lender.

SVB was the 16th largest in the United States, with $209 billion in assets as of Dec. 31, 2022, according to the Federal Reserve. That’s only second to Washington Mutual, which had $307 billion in total assets when it collapsed in 2008.

The primary reason for the bank’s failure, according to industry analysts, was that it heavily invested customer deposits in Treasury bonds, which are highly sensitive to interest rates.

Since the collapse of SVB, there have been widespread contagion fears, with some bankers, investors, and tech executives warning that this could impact small and major banks, especially for institutions that are not well-capitalized.

On Saturday, more than 3,000 CEOs and venture capitalists representing some 220,000 workers signed a petition to appeal to Yellen and other officials to backstop SVB’s depositors. They warned that more than 100,000 jobs could be lost if no action is taken.

However, critics argue that taxpayer money should not be used to support SVB’s bailout. Among these critics is Vivek Ramaswamy, a multimillionaire entrepreneur and author who recently joined the Republican presidential race.

“It makes my blood boil to see these faux ‘free marketeers’ in Silicon Valley fear-mongering all weekend to *create* the very risk of a bank run in America all so they can hold taxpayers hostage for a bailout of a bunch of tech startups who made the mistake of banking with SVB. Don’t fall for their trick,” Ramaswamy wrote on Twitter on March 12, following the government’s announcement.

READ 26 COMMENTS
  • Mondexmomma says:

    How can Yellen guarantee money gainst the unisured? Criminal!!! So dull of corruption

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