The Federal Reserve announces that ALL depositors at Silicon Valley Bank will be protected
The Federal Reserve System announced on Sunday evening that all those with money in the collapsed Silicon Valley Bank would get their money back as the second bank was found to have closed.
The Federal Deposit Insurance Corporation (FDIC) held an auction on Sunday to sell the assets of Silicon Valley Bank, hoping to secure the bank before the market opens on Monday. CNN reported that the buyer was not found.
Shortly after, the Federal Reserve issued a statement saying they were stepping in.
“After receiving advice from the FDIC and Federal Reserve Boards and consultation with the President, Secretary Yellen has approved actions to allow the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, Californiain such a way as to fully protect all depositors,” the statement said.
“Depositors will have access to all their money starting Monday, March 13. Taxpayers 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
People line up outside the closed headquarters of Silicon Valley Bank (SVB) on Friday in Santa Clara, California
A statement issued jointly by Janet Yellen, Secretary of the Treasury; Jerome Powell, chairman of the Federal Reserve; and Martin Grunberg, the chairman of the FDIC — revealed for the first time that Signature Bank is also on a balance sheet.
Signature Bank had 38 private client offices in New York, Connecticut, California and North Carolina.
It was founded in 2001 for high-net-worth clients with assets of more than $250,000.
“We’re looking for a guy who started his business in Brooklyn and is now worth $20 million,” founder and CEO Joseph DePaolo said in an interview Crane’s New York business.
Sunday’s statement continued: “We are also announcing a similar systemic risk exclusion for Signature Bank, New York, New York, which was closed today by the state chartering authority. All depositors of this institution will be healed.
“As with the Silicon Valley Bank decision, taxpayers will not suffer.”
Silicon Valley – the 14th largest in the United States – was brought under government control on Friday in a move that caused shockwaves.
Created to serve technology companies and startups, its collapse left small business owners who relied on the bank to run their companies frantic.
The New York office of Silicon Valley Bank is empty in New York on Friday. But after the shutdown, the FDIC said SVB depositors would have full access to their insured deposits no later than Monday morning
People walk through the parking lot at Silicon Valley Bank’s headquarters in Santa Clara on Friday after the bank was shut down by financial regulators
Sunday’s sell-off, which ended at 5 p.m. ET, was intended to protect anyone with deposits above the government-insured $250,000 and prevent panic.
“They are trying to consolidate the situation before the markets open,” the source said San Francisco Chronicle.
Sheila Bair, former chairman of the FDIC, said there was a scramble to sell the assets.
“It’s the smoothest way to handle it,” Bair said in his speech on NBC News press conference.
“In almost all of our bank failures during the great financial crisis, we had about 400 of them, we bought the assumption, we sold the failed bank to the healthy bank.
“And usually a healthy buyer will cover the uninsured as well because they need the deductible value of those larger contributors, so optimally that’s the best outcome.
“The problem is that it was a rush, it was a lack of liquidity. It was a bank raid, so they didn’t have time to prepare to go to market,” Bair added.
“Banks have to do it now and are catching up.”
Yellen told CBS’s Face the Nation Sunday morning that they have ruled out bailing out the bank, but she said the federal government is trying to find a way to help depositors.
Representative Maxine Waters, D-Calif., who sits on the Financial Services Committee, told CNN: “We are concerned about contamination.
She added, “I want you to know that the FDIC definitely has a plan. We are concerned about the jobs that are at risk and we will do everything we can to ensure that depositors are not only looked after, but that no jobs are lost.”
Waters said they were less concerned about the bank itself and instead “focused on depositors and insuring the uninsured.”
Waters concluded, “People will get their money back; jobs will be saved; payroll will be ready to go.
“People should be calm.”
Federal Reserve Statement on Silicon Valley Bank and Signature Bank
The following statement was released by Treasury Secretary Janet L. Yellen, Federal Reserve Chairman Jerome H. Powell, and FDIC Chairman Martin J. Grunberg:
Today, we are taking decisive action to protect the US economy by strengthening public confidence in our banking system. This move ensures that the U.S. banking system will continue to perform its vital functions of protecting deposits and providing access to credit to households and businesses in a way that fosters strong and sustainable economic growth.
After receiving advice from the FDIC and Federal Reserve Boards and consultation with the President, Secretary Yellen approved actions to allow the FDIC to complete the settlement of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. . Starting Monday, March 13, depositors will have access to all their money. Taxpayers will not bear any damages related to the Silicon Valley Bank decision.
We are also announcing a similar systemic risk exception for Signature Bank, New York, NY, which was closed today by the state chartering authority. All depositors of this institution will be healed. As with the Silicon Valley Bank decision, there is no loss to taxpayers.
Shareholders and certain unsecured debtors will not be protected. Senior management was also removed. Any loss to the Deposit Insurance Fund to support uninsured depositors will be compensated by special assessment of banks as required by law.
Finally, the Federal Reserve announced on Sunday that it will provide additional funding to eligible depository institutions to help banks meet the needs of all their depositors.
The US banking system remains resilient and on solid footing, thanks in large part to post-financial crisis reforms that have provided better safeguards for the banking industry. These reforms, combined with today’s actions, demonstrate our commitment to taking the necessary steps to ensure the safety of depositors’ savings.