U.S. government steps in to stop Silicon Valley bank crisis depositors from getting their money back

[March 13, 2023](Comprehensive report by Epoch Times reporter Xia Yu) The U.S. federal regulator launched emergency measures on Sunday night (March 12) to preventSilicon Valley Bank(SVB) potential spillover effects from rapid collapse, including support for alldepositormeasures. Meanwhile, Signature Bank in New York has been shut down by New York regulators. Depositors at both banks will get all their deposits back.

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The U.S. Treasury said it approved “to fully protect alldepositor“the way” plans to close the two institutions. Starting Monday, those who keep money in the bank will have full access to their accounts.

The Fed also said it was developing a new Bank Term Funding Program (BTFP) aimed at protecting institutions affected by market instability caused by the collapse of SVB.

A joint statement also said there would be no bailout package and no taxpayer costs associated with any new scheme. Shareholders and some unsecured creditors will not be protected.

U.S. regulators announced the action in a joint statement from Treasury Secretary Yellen, Federal Reserve Chair Jerome Powell and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg. SVB depositors will get all their money back on Monday, the group said.

“Today, we are taking decisive action to protect the U.S. economy by strengthening public confidence in our banking system,” the joint statement said.

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The Fed’s lending facility will provide loans for up to one year to banks, savings associations, credit unions and other institutions. Those taking advantage of the facility will be required to provide high-quality collateral such as U.S. Treasury bonds, agency debt and mortgage-backed securities.

“This action will strengthen the banking system’s ability to protect deposits and ensure the continued supply of money and credit to the economy,” the Fed said in a statement. “The Fed stands ready to respond to any liquidity pressures that may arise.”

The U.S. Treasury will back the financing program with up to $25 billion from its Exchange Stabilization Fund.

In addition to this tool, the Federal Reserve also said it would relax the conditions of its discount window (Discount Window, which is a monetary policy tool used by the central bank to provide short-term financing to financial institutions to deal with short-term liquidity shortages), which will use the same BTFP condition.

Markets reacted positively to the development, with futures tied to the Dow Jones Industrial Average surging more than 250 points in early trade. Cryptocurrency prices also rose strongly, with bitcoin up more than 7%.

The news came after Treasury Secretary Janet Yellen said on Sunday morning that there would be no bailout for SVB.

“We’re not going to do that again. But we worry about savers and are focused on meeting their needs,” Yellen said on CBS’ “Face the Nation.”

The SVB collapse was the largest financial institution failure in the United States since Washington Mutual collapsed in 2008.

A few days ago, SVB, a major funding center for tech companies, reported that it was struggling, triggering a run on bank deposits.

Authorities searched over the weekend for a larger body to take over SVB, but failed to do so. PNC was an interested buyer but pulled out, a source told CNBC.

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Reuters exclusively reported that RBC Bank of Canada had also been interested in acquiring SVB, but that interest has now waned.

The situation dates back to September 15, 2008, when investment banking giant Lehman Brothers also found itself insolvent and was looking for a buyer. After a weekend of wrangling, the U.S. government was also unsuccessful in the case, sparking the worst crisis yet.

In addition, the U.S. Treasury Department said in a statement on Sunday that New York state financial regulators closed the cryptocurrency-focused Mark Bank on Sunday local time. All depositors at the bank will be able to withdraw their money on Monday, according to the statement.

Editor in charge: Li Qiong #