The Latest On the Silicon Valley Bank Collapse (BONUS: A Second Bank Failure)
If nothing else, can we at least appreciate that Silicon Valley Bank collapsed on a Friday so we had plenty of time to pretend we're all financial institution bankruptcy experts for a few days?
(In case you're wondering WTF a Silicon Valley Bank is, I wrote a blog on Friday that will get you up to speed…)
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Pretty much from the moment news broke that Silicon Valley Bank had been taken out by the windbreakers over at the FDIC (read: failed), speculation ran rampant about what was next. Over the weekend hedge fund manager Bill Ackman was leading the "government needs to step in" charge. Bill pointed out that contagion could spread and there could be additional bank runs if the FDIC didn't force everyone to chill the fuck out.
And it turns out he was onto something…
Because on Sunday afternoon regulators stepped in to backstop not only Silicon Valley Bank depositors, but other financial institutions should they be impacted by SVB.
CNBC - Banking regulators devised a plan Sunday to backstop depositors with money at Silicon Valley Bank, a critical step in stemming a feared systemic panic brought on by the collapse of the tech-focused institution.
Depositors at both failed SVB and Signature Bank in New York, which was shuttered Sunday over similar systemic contagion fears, will have full access to their deposits as part of multiple moves that officials approved over the weekend. Signature had been a popular funding source for cryptocurrency companies.
Those with money at the bank will have full access starting Monday.
The Treasury Department designated both SVB and Signature as systemic risks, giving it authority to unwind both institutions in a way that it said “fully protects all depositors.” The FDIC’s deposit insurance fund will be used to cover depositors, many of whom were uninsured due to the $250,000 cap on guaranteed deposits.
Along with that move, the Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure.
Every individual or institution with money at SVB would have access to their funds on Monday morning… because as a society we can avert a worldwide financial crisis… but we can't force banks to open on Sundays. That means even if an account has more than $250k in it, which is the FDIC cutoff… under normal circumstances.
Regulators pinky promised that taxpayers won't foot the bill to keep AI connected smart buttplug companies afloat. The FDIC's deposit insurance fund will make SVB depositors whole. Banks pay quarterly "dues" into the DIF, so it's kind of like banks crowdfunding the startups' bailout.
This was important to POTUS and others following the "bailout" backlash following the 2008 financial crisis.
Oh, and the Fed and Treasury just dropped the hottest new lending product on the Street… the Bank Term Funding Program (BTFB). The BTFP will offer loans of up to one year to financial institutions to ensure liquidity.
All of this shouldn't be confused with a bank bailout. Even before the government let us know that they planned to do SVB's customers a solid, Janet Yellen told the American people that there won't be a bank bailout, and that she has no problem watching SVB bleed out.
On the sale front, it's still unclear if anyone wants to pick what's left off of SVB's carcass. Apparently there was little interest in a Sunday auction for the bank. Rumor has it PNC was the closest to pulling the trigger before realizing just how much of a shitshow it actually is.
We also got some free basketball receivership on Sunday. US regulators were nice enough to offer the same terms to customers of Signature Bank, which also collapsed on Sunday. If you're wondering why it flew under the radar, it probably has something to do with having fewer assets. But mostly because it was one of the most prominent banks that catered to the crypto industry.
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