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Is this a bailout and 6 other questions about the SVB collapse
https://www.washingtonpost.com/us-policy/2023/03/13/svb-bank-bailout-fed/.
Gift Link: https://wapo.st/3TgaRX2
Why did the government step in?
When regulators took over SVB on Friday, many financial experts thought the bank’s collapse would have little impact on the broader U.S. economy.
After all, Silicon Valley Bank’s customer base mirrored its name: Its customers were venture capitalists, start-ups and other firms across the technology sector, which had laid off thousands of workers in recent months with few ill effects on the booming national economy.
What does the rescue plan do?
Officials tried to short-circuit the logic of a bank run and restore depositors’ confidence that their money is safe.
The Federal Deposit Insurance Corporation will guarantee all deposits at SVB and Signature — even those above the usual $250,000 limit. SVB held roughly $150 billion in uninsured deposits, and Signature Bank held more than $70 billion in uninsured deposits. Those customers will be able to access all their funds now, even though the banks collapsed. This sends the message that customers have no reason to move their money, because they won’t lose it if their bank goes down.
Is this a government ‘bailout’?
The announcement Sunday immediately set off a debate over whether these actions amount to a federal “bailout.”
On a call with reporters, a Treasury official emphasized that the federal intervention would not bring SVB or Signature back to life, as the enormously controversial bank bailouts during the 2008 financial crisis had done for banks that were close to failing. Their executives would not retain their jobs. These new safeguards were aimed at protecting people and businesses who had made a reasonable decision to put their money into an accredited and regulated bank — not investors who bought risky securities.
Gift Link: https://wapo.st/3TgaRX2
Why did the government step in?
When regulators took over SVB on Friday, many financial experts thought the bank’s collapse would have little impact on the broader U.S. economy.
After all, Silicon Valley Bank’s customer base mirrored its name: Its customers were venture capitalists, start-ups and other firms across the technology sector, which had laid off thousands of workers in recent months with few ill effects on the booming national economy.
What does the rescue plan do?
Officials tried to short-circuit the logic of a bank run and restore depositors’ confidence that their money is safe.
The Federal Deposit Insurance Corporation will guarantee all deposits at SVB and Signature — even those above the usual $250,000 limit. SVB held roughly $150 billion in uninsured deposits, and Signature Bank held more than $70 billion in uninsured deposits. Those customers will be able to access all their funds now, even though the banks collapsed. This sends the message that customers have no reason to move their money, because they won’t lose it if their bank goes down.
Is this a government ‘bailout’?
The announcement Sunday immediately set off a debate over whether these actions amount to a federal “bailout.”
On a call with reporters, a Treasury official emphasized that the federal intervention would not bring SVB or Signature back to life, as the enormously controversial bank bailouts during the 2008 financial crisis had done for banks that were close to failing. Their executives would not retain their jobs. These new safeguards were aimed at protecting people and businesses who had made a reasonable decision to put their money into an accredited and regulated bank — not investors who bought risky securities.
Here's a decent explainer for the current situation. I've provided a gift link if you want to read the whole thing for free.
2 replies
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