Washington insures all deposits
Nfter the difficulties faced by the US start-up financier Silicon Valley Bank, the US government announced that all deposits with the bank would be secured. Minister of Finance Janet Yellen, Federal Reserve Chairman Jerome Powell and the US deposit insurance company FDIC announced in a joint statement on Sunday evening (local time) that all depositors would be fully protected and would be able to access all their money from Monday. “The taxpayer will not incur any losses related to the resolution of Silicon Valley Bank,” it said.
A similar exemption also applies to Signature Bank in New York, which was closed by its state licensing authority on Sunday. All depositors of this institution would also be compensated. These are important measures to protect the American economy by increasing public confidence in the American banking system. The US banking system is still resilient and stands on solid ground.
The FDIC only protects deposits up to $250,000 per customer and bank. According to a report by the Washington Post, however, the Federal Banking Act would allow the deposit insurance fund to protect unsecured deposits if systemic risks otherwise threatened.
“Help, but no rescue”
A senior Treasury official stressed that the aim was to help depositors, not to bail out the banks. It is not a situation like the 2008 financial crisis.
Yellen previously had a state bailout Silicon Valley bank excluded. In the financial crisis a few years ago, the government intervened in this way, Yellen said in response to a question in an interview with the television station CBS. But she emphasized: “We won’t do that again.”
On Friday, the Silicon Valley Bank, which specializes in start-up financing, was temporarily closed after a failed emergency capital increase and placed under state control. This caused unrest around the world. The financial institution had run into massive difficulties as a result of billions in losses from the sale of securities. SVB is a little-known bank to the general public, but has played a major role in financing start-up companies in the US since the 1980s.
US President Joe Biden promised on Sunday that those responsible for the bank failures would be held accountable. “The American people and American businesses can have confidence that their bank deposits will be there when they need them,” the Democrat continued. The head of state announced that he would like to comment on the banking system on Monday.