The Federal Reserve announced Sunday night that all those with money in the collapsed Silicon Valley Bank will get their money back, as a second bank was revealed to have gone out of business.
The Federal Deposit Insurance Cooperation (FDIC) held an auction of Silicon Valley Bank’s assets on Sunday, hoping to insure the bank before the market opened on Monday. CNN reported that no buyer was found.
Shortly after, the Federal Reserve issued a statement saying it would intervene.
‘After receiving a recommendation from the FDIC and Federal Reserve Boards of Directors, and consulting with the President, Secretary Yellen approved actions that allow the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors’, the statement says.
“Depositors will have access to all their money starting Monday, March 13. The taxpayer will not bear the losses associated with the resolution of Silicon Valley Bank.”
Treasury Secretary Janet Yellen announced Sunday that the Federal Reserve will protect deposits at Silicon Valley Bank and Signature Bank
The statement, which was jointly issued by Janet Yellen, Secretary of the Treasury; Jerome Powell, Chairman of the Federal Reserve; and Martin Gruenberg, Chairman of the FDIC, revealed for the first time that Signature Bank was also floundering.
Signature Bank had 38 private client offices in New York, Connecticut, California, and North Carolina.
‘We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state charter authority. All depositors of this institution will be upright. As with the Silicon Valley Bank resolution, the taxpayer will not take a loss.’
The bank, the 14th largest in the United States, was placed under government control on Friday in a move that shocked financial observers.
Established to serve tech companies and startups, its collapse has left small business owners who have relied on the bank to run their businesses in a frenzy.
Sunday’s sale, which concluded at 5:00 pm ET, was intended to protect all those whose deposits exceed $250,000 in government insurance and prevent panic.
“They are trying to prop things up before the markets open,” a source said. The San Francisco Chronicle.
Sheila Bair, the former chair of the FDIC, said there was a scramble to sell the assets.
“That’s the easiest way to handle this,” Bair said in an appearance on Meet the NBC News Press.
‘In almost all of our bank failures during the great financial crisis, we had about 400 of them, we bought an assumption, we sold a failed bank to a healthy bank.
“And typically the healthy acquirer would also cover the uninsured because they wanted the franchise value of these large depositors, so optimally that’s the best outcome.
‘The problem is that this was a race, this was a liquidity failure. It was a bank run, so they didn’t have time to prepare for the market,” Bair added.
“Banks have to do that now and catch up.”
Treasury Secretary Janet Yellen told CBS’s Face the Nation on Sunday morning that bailing out the bank had been ruled out.
But he said the federal government is trying to find a way to help depositors.
Rep. Maxine Waters, D-Calif., who sits on the financial services committee, told CNN: “We’re concerned about contagion.
She added: ‘I want you to know that the FDIC definitely has a plan. We care about the jobs that are at stake, and we’re going to do everything we can to make sure that not only depositors are served, but that jobs aren’t lost.’
Waters said they were less concerned with the bank itself and were instead “focusing on depositors and insuring those who are uninsured.”
Waters concluded: ‘People are going to get their money back; jobs will be maintained; payroll will be ready to go.
People should be calm.
Federal Reserve Statement on Silicon Valley Bank and Signature Bank
The following statement was issued by Treasury Secretary Janet L. Yellen, Federal Reserve Board Chairman Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:
Today we are taking decisive action to protect the US economy by strengthening public confidence in our banking system. This step will ensure that the US banking system continues to perform its vital functions 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 FDIC and Federal Reserve Boards of Directors, and consulting with the President, Secretary Yellen approved actions that allow the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that protects completely to all depositors. . Depositors will have access to all their money starting Monday, March 13. The taxpayer will not bear the losses associated with the resolution of Silicon Valley Bank.
We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state charter authority. All depositors of this institution will be upright. As with the Silicon Valley Bank resolution, the taxpayer will not take a loss.
Shareholders and certain unsecured debt holders will not be protected. Senior management has also been eliminated. Any loss from the Deposit Insurance Fund to support uninsured depositors will be recovered through a special assessment of banks, as required by law.
Finally, the Federal Reserve Board announced Sunday that it will make additional funds available to eligible depository institutions to help ensure banks have the ability to meet the needs of all their depositors.
The US banking system remains resilient and on solid footing, largely due to post-financial crisis reforms 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.