Fed bailed out SVB savers

The Silicon Valley Bank was closed on Friday by the California Department of Financial Protection and Innovation, with the FDIC in charge of the liquidation, Globe reports. SVB was one of the largest banks in the country and one of the leading banks for venture capital firms and start-ups.

Notifying on Sunday morning that no bailout would come, the Federal Reserve announced early Sunday evening that those with funds in a recently failed Silicon Valley bank would not lose their money even if they had more than the FDIC insurance amount in their account.

Citing the “systemic risk” exception, all funds at SVB (as well as New York’s Signature Bank, which went bankrupt today) are guaranteed to be available Monday morning.

“Having received advice from the boards of the FDIC and the Federal Reserve, and in consultation with the President, Secretary Yellen has approved actions to enable the FDIC to complete its decision on Silicon Valley Bank, Santa Clara, Calif., in a manner that fully protects all savers,” reads the statement. press statement released by the Federal Reserve on Sunday afternoon. “Depositors will have access to all their money starting Monday, March 13th. The taxpayer will not incur any loss related to the Silicon Valley Bank decision.”

The announcement came despite Treasury Secretary Janet Yellen saying on CBS’ Face the Nation on Sunday morning that there would be no SVB bailout. This announcement came about 8 hours before the Federal Reserve, FDIC, and Treasury Department’s joint depositor guarantee announcement.

As to how the bailout would work, especially with the added assurance that no tax money would be used, the statement said:

“Additional funding will be provided through the creation of a new Bank Term Financing Program (BTFP) offering loans for up to one year to banks, savings associations, credit unions and other eligible depository institutions that issue U.S. Treasury bills, the agency. debt obligations and mortgage-backed securities, as well as other assets qualifying as collateral. These assets will be valued at face value. BTFP will be an additional source of liquidity for high-quality securities, eliminating the need for the institution to quickly sell these securities during times of stress.

“With the approval of the Minister of Finance, the Ministry of Finance will provide up to $25 billion from the Exchange Stabilization Fund in support of BTFP. The Federal Reserve does not expect to need to draw on these reserve funds.”

It is also possible that other banks will be forced to pay to help cover the bailout.

The collapse of the SVB caused shock not only in Silicon Valley, where it was an integral part of the local venture capital and technology startup economy, but throughout the country’s banking system. The failure of Signature, which made a big bet on the cryptocurrency market, was directly related to the failure of SVB, according to federal regulators.

According to Globe, in addition to its standard financial mission, SVB has been a leader in the ESG sector – environment, social life and governance. It is not yet clear to what extent this concept which includes assessing firms, people and countries not only by their creditworthiness but also by how much perceived “good” they are doing in their community and in the world, played a role in the collapse of the SVB, although many financial experts suspect that the “awakening ‘ led to ‘go broke’.

Republican presidential candidate and Silicon Valley multimillionaire Vivek Ramaswamy said over the weekend that the bank should not be bailed out, that it is poorly managed, its collapse is not really a “systemic risk” to the financial system, and any such risk is purposefully amplified. to get the government to intervene.

Speaking to CNN, Ramaswami added: “So what’s happening right now is that a lot of Silicon Valley CEOs and VCs this weekend, a lot of them even contacted me to push this version that this will lead to a bank run in America if The Silicon Valley Bank didn’t really bail out. But what they are doing is actually trying to create fear in a person. I think it could actually be a self-fulfilling prophecy, which is dangerous.”

In addition to its close ties to the technology industry and its belief in the ESG and DEI movements, the SVB has also been linked to a number of major California political players, including Gov. Gavin Newsom’s wife.

Literally this morning globe published an article stating:

“Looking at the biography of the SVB board of directors and the executive team, one can see an interesting connection with the first partner of California Jennifer Siebel Newsom – one of the leaders of SVB is on the board of directors of the California project Jennifer Siebel Newsom.” The entire story can be found here.

It is not yet known exactly whether and how politics played a role, and who communicated with whom for several hours between Yellen saying “no” and then – together with President Biden – saying “yes.”