WASHINGTON — Plans to be announced next Sunday Full refund of deposit made at the collapsed Silicon Valley Bank and the shuttered Signature Bank will rely on Wall Street and major financial institutions — not taxpayers — to pay bills, Treasury officials said. main said.
A senior finance ministry official said: “For banks that have been included in the stream, the FDIC will use funds from the Deposit Insurance Fund to ensure that all of their depositors are eligible. Be safe”. incognito.
“The deposit insurance fund is bearing the risk,” emphasized this official. “This is not taxpayer money.”
The Deposit Insurance Fund is part of the FDIC and is funded by assessed quarterly fees from FDIC-insured financial institutions, as well as interest from funds invested in government bonds.
The DIF currently has more than $100 billion in it, which the Treasury official said was “more than enough” to cover SVB and Signature depositors.
The Biden administration is acutely aware of the public anger caused by the taxpayer-funded bailouts of the major Wall Street banks during the 2008 financial crisis and the use of the DIF to aid people. Depositing money is seen as a way to avoid repeating the same process.
Finally, federal officials strongly opposed the idea that the plans for SVB and Signature constitute a “bailout.”
“The bondholders and the equity of the banks are being wiped out,” said the official at the Treasury Department. “They take the risk as stock holders, they’ll take the loss.”
“Companies are not underwritten … depositors are being protected.”
As early as Sunday night, there were early signs that Biden’s plan to use DIF to help SVB and Signature depositors was responding to the request of at least one critic of the 2008 bailouts. .
Senator Bernie Sanders, I-Vt., emphasize that “If there’s a Silicon Valley Bank bailout, it has to be 100% funded by Wall Street and major financial institutions.”
Sanders blames SVB’s downfall successful efforts of the Republican Party to loosen banking regulations, signed into law by former President Donald Trump in 2018.
On Sunday, California Democratic Representative Katie Porter said she was writing legislation to reverse the 2018 bill.
On Sunday afternoon, the Treasury Department approved plans to disburse both SVB and Signature Bank, based in New York, “in a way that fully protects all depositors.”
The dramatic moves come just days after SVB, a key financial hub for tech companies, reported that it was struggling, causing bank withdrawals. The signature was shut down by the government on Sunday.
SVB’s failure was the biggest collapse of a financial institution nationwide since the bankruptcy of Washington Mutual in 2008.
