SVB, Signature Bank Depositors to Get All Their Money as Fed Moves to Stem Crisis
Regulators take control of a second bank and race to roll out emergency measures
Etienne Note: The organized crime U.S. “Government” is now $31 TRILLION in debt, projecting a $51 TRILLION debt over the next decade is now promising to insure large-scale banks. While they are only committing to SVB and Signature right now with $319 Billion in deposits where does it end? Madness…
WSJ article By Nick Timiraos, Andrew Ackerman and Andrew Duehren
Updated March 12, 2023 9:31 pm ET
U.S. regulators took control of a second bank Sunday and announced emergency measures to ease fears depositors might pull their money from smaller lenders after the swift collapse late last week of Silicon Valley Bank.
The measures, which include guaranteeing all deposits of SVB, were designed to shore up wavering confidence in the banking system. They were jointly announced Sunday night by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp.
Regulators announced they had taken control of Signature Bank, one of the main banks for cryptocurrency companies, on Sunday. The New York bank’s depositors will be made whole, officials said.
A senior Treasury official said the steps didn’t constitute a bailout because stock and bondholders in SVB and Signature wouldn’t be protected.
The Fed and Treasury separately said they would use emergency-lending authorities to make more funds available to meet demands for bank withdrawals, an additional effort to prevent runs on other banks.
“This should be enough to stop the depositor panic,” said William Dudley, who served as president of the New York Fed from 2009 to 2018. “What it tells you is that risks to the financial system are not just tied to the big money-center banks.”
Officials took the extraordinary step of designating SVB and Signature Bank as a systemic risk to the financial system, which gives regulators flexibility to guarantee uninsured deposits.
Officials said that depositors at SVB will have access to all of their money on Monday.
The government’s bank-deposit insurance fund will cover all deposits at the two banks, rather than the standard $250,000. Federal regulators said any losses to the government’s fund would be recovered in a special assessment on banks and that the U.S. taxpayers wouldn’t bear any losses.
In a separate statement Sunday night, the Fed said it “is closely monitoring conditions across the financial system and is prepared to use its full range of tools to support households and businesses, and will take additional steps as appropriate.”
The central bank said it would make additional funding available to banks through a new “Bank Term Funding Program,” which will offer loans of up to one year to banks that pledge U.S. Treasury securities, mortgage-backed securities and other collateral. Up to $25 billion from the Treasury’s exchange-stabilization fund will backstop the Fed lending program.
Many of those securities have fallen in value as the Fed has raised interest rates. The terms would allow banks to borrow at 100 cents on the dollar for securities trading potentially well below that value, potentially putting the government at risk of losses incurred by banks. Critics said the move would essentially offer a backdoor subsidy to bank investors and management for failing to properly manage interest-rate risks.
Those terms are more generous than typical emergency bank loans of up to 90 days offered through the Fed’s main “discount window” borrowing program. The program could signal that banks that face withdrawals won’t have to liquidate securities and take losses to raise cash.
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