Bank Depositors Will Get Their Money Back

US takes action to ease pain of SVB collapse, as another big bank fails
By Evann Gastaldo,  Newser Staff
Posted Mar 13, 2023 12:07 AM CDT
Updated Mar 13, 2023 5:38 AM CDT
Number of 2023 Bank Failures Now Up to 3
An FDIC sign is posted on a window at a Silicon Valley Bank branch in Wellesley, Mass., on Saturday, March 11, 2023.   (AP Photo/Peter Morgan)

The government has taken what the AP calls "extraordinary steps" to avert a potential banking crisis in the wake of Silicon Valley Bank's failure, with the Treasury Department, Federal Reserve, and FDIC issuing a joint statement Sunday assuring SVB clients they would all be protected and that depositors, starting Monday, will be able to access their money, even if their holdings exceed the FDIC's $250,000 insurance limit. The statement also notes that "no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer." As the AP points out, there has been no bailout of the actual bank—banks, actually; more on that below:

  • Another bank fails: Signature Bank, which is based in New York, also failed and was being seized Sunday, regulators announced. The feds' statement says "a similar systemic risk exception" will apply to Signature Bank: "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." It's the third-largest bank failure in the nation's history at more than $110 billion in assets (SVB was the nation's second-largest ever). It's also the third bank failure in recent days after Silvergate Bank and then SVB.

  • Shoring up other banks: The feds' statement said "additional funding" will be available "to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors," and First Republic Bank has already announced it's getting access to that funding as well as funding from JPMorgan Chase. The Wall Street Journal has more on that.
  • Emergency lending program: The Fed also announced an emergency lending program Sunday, under which banks that need to raise money to pay depositors can borrow it from the Fed instead of dumping Treasuries or other securities, as SVC was forced to do at a loss to cover customer withdrawals. MarketWatch has more on the program.
  • Who's not protected: The feds' joint statement notes that "shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed." Axios reports that SVB had reportedly paid out bonuses to some US employees hours before it was seized.
  • Biden comments: Speaking as he boarded Air Force One Sunday on his way back to Washington, Biden said he was "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'd address the situation in further remarks Monday.
  • What will Monday look like? Analysts predicted financial markets would be soothed a bit by Sunday's moves. "Monday will surely be a stressful day for many in the regional banking sector, but today’s action dramatically reduces the risk of further contagion,” economists at Jefferies, an investment bank, said in a research note.
(Read more Silicon Valley Bank stories.)

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