Thanks to the California Globe for running this piece. You can visit the website at: https://californiaglobe.com/
After indicating Sunday morning there would be no help forthcoming, the Federal Reserve announced early Sunday evening that those with funds in the recently-failed Silicon Valley Bank will not lose their money, even if their account contained more than the FDIC insured amount.
Citing a “systemic risk” exception, all funds in SVB (as well as New York’s Signature Bank, which also failed Sunday) are guaranteed to be available Monday morning.
“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,” reads a press statement issued by the Federal Reserve Sunday afternoon. “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.”
This announcement comes despite Treasury Secretary Janet Yellen saying on CBS’ “Face the Nation” broadcast Sunday morning that there was not going to be a bailout of SVB - https://www.cbsnews.com/video/yellen-rules-out-bailout-for-silicon-valley-bank-were-not-going-to-do-that-again/ . That statement was made about 8 hours before the joint Federal Reserve, FDIC, Treasury Department announcement of the depositor guarantees.
As to how the bailout will work, particularly with the additional guarantee that no tax money will be used, the statement read:
“The additional funding will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress.
“With approval of the Treasury Secretary, the Department of the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP. The Federal Reserve does not anticipate that it will be necessary to draw on these backstop funds.”
It is also expected that other solvent banks will forced to pay to help cover the bailout.
The SVB failure sent shockwaves through not only the Silicon Valley – where it was an integral part of the local venture capital and tech “start-up” economy - but also through the nation’s entire banking system. The failure of Signature – which bet heavily on the crypto market - was directly tied to SVB’s failure, said federal regulators - https://www.wsj.com/articles/signature-bank-is-shut-by-regulators-after-svb-failure-a5f9e0f7 .
Beyond its standard financial mission, as it were, SVB was a leader in the ESG - Environmental, Social, and Governance – sector. It is not yet clear how much this concept - which involves valuing firms and people and countries for not only their creditworthiness but also by how much putative “good” they do in their community and the world – played a role in SVB’s collapse, though many financial experts suspect that “going woke” led to “going broke.” - https://dailysceptic.org/2023/03/12/silicon-valley-bank-get-woke-go-broke/
GOP presidential contender and Silicon Valley multi-millionaire Vivek Ramaswamy said over the weekend that the bank should not be bailed out, that it was poorly run, its failure was not actually a “systemic risk” to the financial system, and any such risk was being purposefully amplified to force the government to step in.
On a CNN appearance, Ramaswamy added that "So what's happening right now is, a lot of Silicon Valley executives and V.C.s this weekend, many of them have even reached out to me to push this narrative that that's going to create a bank run in America if Silicon Valley Bank isn't actually bailed out. But what they're doing is actually trying to create the fear of one. I think that can actually become a self-fulfilling prophecy, which is dangerous."
Beyond its intimate ties to the tech industry and its faith in the ESG and DEI movements, SVB was also connected to a number of California’s major political players, including the wife of Gov. Gavin Newsom.
Earlier on Sunday, the Globe published an article that noted:
“In looking at the SVB board and executive team bios, there is an interesting tie to California’s First Partner Jennifer Siebel Newsom – one of the SVB Executives sits on the board of Jennifer Siebel Newsom’s California Partners Project.” The entire story can be found here - https://californiaglobe.com/articles/silicon-valley-bank-ties-to-california-first-partner-jennifer-newsom/
It is as yet not exactly known if and how politics played a role and who communicated with whom in the few hours between Yellen saying no and then – along with President Biden – saying yes.
For a more detailed look at SVB’s background, see here: https://brownstone.org/articles/where-is-occupy-silicon-valley/
What's the point of having rules, and forcing depositors to sign agreement statements, when in an instant those can be ignored in order to help those who need no help, help themselves to more?
Deposits are guaranteed up to a quarter million. That would do for most people. Why do these 1%-ers need to be bailed out beyond that? And by whom? Yellen said it would not come out of the federal budget. What then? Is Aunty Jane gonna reach into her own purse?
However it's camouflaged, we all know the truth: the rest of us will all get the bill in order to keep the champagne crowd in clover. Powerful overweening government creates powerful self seeking elites.
Hooray for Vivek!
I'm borrowing from your excellent post to share the three perspectives on the bank failures. Well done.