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Tag: Silicon Valley Bank

  • Biden White House closely watching Federal Reserve following bank failures | CNN Politics

    Biden White House closely watching Federal Reserve following bank failures | CNN Politics

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    CNN
     — 

    All eyes are trained on the Federal Reserve as it prepares to announce another potential interest rate hike Wednesday afternoon – exactly 10 days after the Biden administration stepped in with dramatic emergency actions to contain the fallout from two bank failures.

    Biden White House officials will be closely watching the highly anticipated rate decision – and monitoring every word of Fed Chairman Jerome Powell’s public comments – for any telling clues on how the central bank is processing what has emerged one of the most urgent economic crises of Joe Biden’s presidency.

    The moment creates a complex, if carefully observed, dynamic for the administration’s top economic officials who have spent much of the last two weeks engaged in regular discussions and consultations with Powell and Fed officials as they’ve navigated rapid and acute risks to the banking system.

    The Fed’s central role in not only supervising US banks and the stability of the financial system, but also in serving as a liquidity backstop in moments of systemic risk, has once again thrust the central bank back to center stage in the government’s effort to stabilize rattled markets.

    But Biden has made the central bank’s independence on monetary policy an unequivocal commitment – and has repeatedly underscored that he has confidence in the Fed’s central role in navigating inflation that has weighed on the US economy for more than a year and remained stubbornly persistent.

    Even as some congressional Democrats have directed fire at Powell for the rapid increase in interest rates and the risks the effort poses to a robust post-pandemic economic recovery, White House officials have taken pains not to shed light on their views publicly.

    Officials stress nothing in the last week has changed that mandate from Biden – and note that the widespread uncertainty about what action the Fed will take on rates only serves to underscore that reality.

    It’s a reality that comes at a uniquely inopportune time for a banking system that has shown clear signs of stabilizing in the last several days, but is still facing a level of anxiety among market participants and depositors about the durability of that shift.

    “I do believe we have a very strong and resilient banking system and all of us need to shore up the confidence of depositors that that’s the case,” Treasury Secretary Janet Yellen said during remarks Tuesday in Washington.

    Yellen said a new emergency lending facility launched by the Fed, along with its existing discount window, are “working as intended to provide liquidity to the banking system.”

    But prior to the closures of Silicon Valley Bank and Signature Bank, analysts had widely predicted that the Fed would unveil a half-point rate hike. But after the sudden collapse of the two banks that sent shockwaves across the global economy, there has been a growing belief among Wall Street analysts that the central bank will pull back, and only raise rates by a quarter-point – in part to try to alleviate concerns that the Fed’s historically aggressive rate hikes over the past year were precisely to blame for this month’s financial turmoil.

    But there are also concerns that a dramatic pullback, like choosing to forgo any rate increases altogether until a later meeting, would bring its own risks of signaling to the market that there are deeper systemic problems.

    It’s a conundrum top Fed officials started grappling with in the first of their two-day Federal Open Market Committee meeting on Tuesday. How they choose to navigate the path ahead will remain behind closed doors until their policy statement is released Wednesday afternoon.

    Powell is scheduled to speak to reporters shortly after.

    For officials inside the Biden White House, Wednesday is poised to offer critical insight into how the central bank is grappling with its urgent priority of bringing down inflation, while at the same time, minimizing the risk of additional dominoes falling in the US banking sector.

    Those two imperatives – bringing prices down and maintaining stability across the US financial sector – are urgent priorities for the Biden White House, particularly as the president moves closer to a widely expected reelection announcement and the health of the economy remains the top issue for voters.

    Yet the Fed’s decision will come at a moment of accelerating political pressure on the Fed itself – and Powell specifically.

    Massachusetts Democratic Sen. Elizabeth Warren, a member of the Senate Banking Committee, slammed Powell, saying he has failed at two of his main jobs, citing raising interest rates and his support of bank deregulation.

    “I opposed Chair Powell for his initial nomination, but his re-nomination. I opposed him because of his views on regulation and what he was doing to weaken regulation, but I think he’s failing in both jobs, both as oversight manager of these big banks which is his job and also what he’s doing with inflation,” Warren said on NBC’s “Meet the Press.”

    White House officials have made clear – with no hesitation – that Biden’s long-stated confidence in Powell is unchanged. Powell, who was confirmed for his second four-year term as Fed chair last year, announced last week that the Fed would launch a review into the failure of Silicon Valley Bank.

    Treasury and Fed officials, along with counterparts at other federal regulators and their international counterparts, have continued regular discussions this week as they’ve monitored the system in the wake of the weekend collapse, and eventual sale, of European banking giant Credit Suisse.

    US officials viewed the Credit Suisse collapse as unrelated to the crisis that took down the US banks a weekend prior, although they acknowledged it posed broader risks tied to confidence, or the potential lack thereof, in the system.

    In recent days, White House officials have begun to cautiously suggest that they see signs of the US economy stabilizing, following the turbulent aftermath of the closures of Silicon Valley Bank and Signature Bank. Biden, for his part, has credited the sweeping steps his administration announced – namely, the backstopping of all depositors’ funds held at the two institutions and the creation of an emergency lending program by the Federal Reserve – as having prevented a broader financial meltdown.

    He has also called on US regulators and lawmakers to strengthen financial regulations, though it is not yet clear what specific actions the president may ultimately throw his weight behind.

    Press secretary Karine Jean-Pierre declined to comment Tuesday afternoon at the White House press briefing on how she and other officials were watching the Fed’s upcoming decision.

    “The Fed is indeed independent. We want to give them the space to make those monetary decisions and I don’t want to get ahead of that,” Jean-Pierre said. “I don’t even want to give any thoughts to what Jerome Powell might say tomorrow.”

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  • Years after the housing crash, the specter of

    Years after the housing crash, the specter of

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    During the 2008 financial crisis, so-called too-big-to-fail banks were deemed too large and too intertwined with the U.S. economy for the government to allow them to collapse despite their role in causing the subprime loan crash.

    Yet 15 years later, the forced sale of 166-year-old Credit Suisse — one of 30 banks around the world designated by regulators as “globally significant,” as well as the startling failure of regional lender Silicon Valley Bank (SVB) — are rekindling concerns about the risk of financial institutions defined as too big to fail. 

    One thing that’s changed in the intervening years since the housing bust: The nation’s largest banks have only grown larger. JPMorgan Chase now has $2.6 billion in assets, a 16% increase from 2008, while Bank of America’s assets have jumped 69% to $3.1 trillion. At the same time, lawmakers in 2018 weakened the post-crisis regulations enacted in what came to be known as Dodd-Frank, a sweeping law passed in 2010 aimed at ensuring the safety of the U.S. banking systems. 

    The “too big to fail” banks “are still incredibly risky, and they are bigger and more concentrated than before,” said Mike Konczal, the director of macroeconomic analysis at the Roosevelt Institute, a liberal-leaning think tank.

    To be sure, the 2008 financial crisis involved issues including complex financial instruments, such as mortgage-backed securities, credit default swaps and derivatives, along with lax lending standards. Such issues aren’t playing a part in the recent banking turmoil. 

    Instead, Switzerland’s Credit Suisse was hamstrung by a number of other problems, including a $5.5 billion loss on its dealings with private investment firm Archegos in 2021 and a spying scandal. When its biggest investor, Saudi National Bank, last week declined to put up more money, investors and depositors headed for the exits, paving the way for UBS’ takeover of the bank on Sunday.

    According to the Financial Stability Board, the U.S. banks considered “global systemically important banks” are:

    • JPMorgan Chase
    • Bank of America
    • Citi
    • Goldman Sachs
    • Bank of New York Mellon
    • Morgan Stanley
    • State Street
    • Wells Fargo

    “Very boring banking” but still risky

    Investors cast a more skeptical look at Credit Suisse in the aftermath of SVB’s March 10 collapse, when U.S. regulators took over the regional bank and declared it insolvent. Unlike the 2008 crisis, SVB’s problems stemmed from what Konczal calls “very boring banking, all things considered.”

    SVB was hit by a double-whammy of higher interest rates, which lowered the value of its U.S. government and mortgage bond holdings, and a faster cash-burn rate by its tech-heavy customers due to the slowing economy. With depositors withdrawing money at a faster clip, SVB had to sell its bonds to shore up its capital, but took a $1.8 billion loss on the sale because of the decline in the value of those investments. 

    SVB also had a significantly higher share of uninsured depositors than other banks, which meant that much of their assets wouldn’t be protected by the FDIC’s $250,000 insurance if the bank failed. As a result, spooked depositors rushed to withdraw their funds, creating a classic “run on the bank.” 

    Experts say Congress opened the door to such problems five years ago when it loosened parts of Dodd-Frank, which among other changes forced the nation’s biggest banks to adopt safer lending and investing practices. Under that law, banks with more than $50 billion in assets became subject to stringent requirements including a stress test, which examines whether a bank has enough capital to survive when financial conditions sour. 

    The 2018 law blunting Dodd-Frank lifted that threshold from $50 billion in assets to $250 billion. That meant SVB, with just over $200 billion in assets, didn’t have to undergo a stress test.

    “[T]here would have been increased scrutiny” Konczal said, noting the move to weaken the banking laws. 

    “It certainly was the case that Congress and regulators really did believe that banks in this [midsize] range would have less of a problem and it would be mitigated,” he said.

    “Contagion” risks

    Senator Elizabeth Warren, a Democrat from Massachusetts, introduced a bill on March 14 that would roll back the 2018 law weakening Dodd-Frank. Other lawmakers are proposing an overhaul of FDIC insurance in order to protect a greater share of deposits. 

    Warren noted in a statement that she had warned that rolling back parts of Dodd-Frank would cause banks to “load up on risk to boost their profits and collapse, threatening our entire economy — and that is precisely what happened.”

    Asked if one of the “too big to fail” banks could falter, Konczal noted the banking problems aren’t as bad as in 2008, while adding, “We just don’t know.” 

    “Everyone thought it was fine with when the Fed bailed out Bear Stears, and five months later Lehman [Brothers] failed,” he said.


    Cohn says there’s a “contagion effect” if people lose confidence in banks

    06:03

    Meanwhile, part of the issue impacting the banking industry boils down to something that’s hard to address through regulation: “contagion,” or the potential for depositors’ fears about bank safety to migrate to other institutions, causing more bank runs and additional failures. 

    “Bank runs are a crisis of confidence,” said Gary Cohn, the former top economic adviser in the Trump White House who is now vice chairman of IBM, told CBS News’ “Face the Nation.” 

    He added, “There are thousands of small and regional banks in the United States — this usually doesn’t stop after two [banks].”

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  • Listen: The downfall of Silicon Valley Bank | Bank Automation News

    Listen: The downfall of Silicon Valley Bank | Bank Automation News

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    The swift collapse of Silicon Valley Bank has shaken the banking industry during the past two weeks.  SVB engaged in risky lending practices and did not have the necessary safeguards in place, leading to a run on deposits that eventually sent the bank into receivership, Mike Sekits, co-founder and managing director of community bank partnership […]

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    Brian Stone

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  • Yellin: We have plan in place in case more banks fail

    Yellin: We have plan in place in case more banks fail

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    Stocks rebound as Yellen testifies on banks


    Yellen testifies on Capitol Hill as bank stocks see slight rebound

    05:51

    Treasury Secretary Janet Yellen will tell America’s top banking lobby Tuesday that the government has a playbook if other financial institutions, like Silicon Valley Bank, collapse and pose a risk to banking sector.

    In a speech to the American Bankers Association,  Yellen discusses the government’s emergency rescue of SVB and Signature Bank‘s depositors — and says  similar action could be taken in the event of a bank run. 

    “The steps we took were not focused on aiding specific banks or classes of banks,” Yellen said. “Our intervention was necessary to protect the broader U.S. banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.” 

    Her comments are likely to reassure  depositors and Wall Street investors and come as the government and the nation’s top bankers rush to contain the worst banking crisis in 15 years.

    The collapse of Silicon Valley Bank sent a shockwave across the global financial system earlier this month. And fears about the stability of midsize U.S. banks have shaken the banking sector.  

    First Republic Bank continues to struggle as it works to convince investors it is viable. 

    Last week, the nation’s top 11 banks injected $30 billion of liquidity to shore up troubled First Republic. 


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  • SVB and First Republic’s problems aren’t going away. Here’s why — and if you are at risk.

    SVB and First Republic’s problems aren’t going away. Here’s why — and if you are at risk.

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    Silicon Valley Bank’s abrupt takeover by regulators on March 10 was followed by federal reassurances that all depositors — insured and uninsured alike — would get their money. Yet despite that guarantee, the turmoil in the banking industry has only grown, prompting an emergency cash infusion at another regional institution and a historic takeover of a “too big to fail” bank.

    The tumult is raising the specter of the 2008 global financial crisis, which sparked the Great Recession and led to the loss of 8 million jobs and a housing crisis. The lessons from that painful chapter are prompting questions about whether the current banking problems could spread and pose a risk to the U.S. economy and to individual consumers’ banking deposits.

    “The word at a the top of everyone’s mind at the moment is ‘contagion’: Will the troubles at SVB, [Credit Suisse], and others spread to the wider banking sector and lead to a 2008-like banking crisis?,” said LPL Financial chief equity strategist Jeffrey Buchbinder and other LPL experts in a Monday research note. 

    Another 190 banks are in danger of failure even if half their uninsured depositors withdraw their funds, indicating that Silicon Valley Bank isn’t alone in facing risks from a classic “run on the bank,” according to a new analysis from researchers at Stanford, Columbia, Northwestern and University of Southern California.

    Here’s what to know about the ongoing banking turmoil and the risks it poses.

    Why is SVB’s failure still impacting the banking industry?

    In a nutshell, it’s because other banks share similar risks with Silicon Valley Bank, although not all to the same extent. 

    SVB’s financial position grew less stable during the past year due partly to the Federal Reserve’s series of interest rate hikes. While the central bank was aiming to tame the highest inflation in 40 years by raising rates, the actions had a secondary impact: the rate hikes lowered the value of U.S. government bonds, an investment commonly held by banks including SVB. 

    When SVB needed to shore up its financials earlier this month, it sold all of its available-for-sale securities — $21 billion in bonds. But because of the decline in bond valuations, SVB took a $1.8 billion loss on that sale, spooking depositors. 

    That sparked a classic bank run, with depositors hurrying to withdraw their funds from SVB — and two days after announcing the bond sale, the bank was shut down by regulators, who declared that it was insolvent.

    Now, depositors at other banks and financial experts are questioning whether the same thing could happen at other institutions. 

    Could more banks fail?

    Yes, according to the new report from researchers at Stanford, Columbia, Northwestern and University of Southern California.

    Part of the issue is whether a bank has a high share of uninsured deposits, because depositors with funds above $250,000 — the threshold for FDIC insurance — stand to lose that money if the institution fails. That could put banks with a high share of uninsured deposits at a higher risk for a bank run, which in turn could lead to insolvency. 

    To be sure, SVB had a disproportional share of uninsured funds than other banks, with researchers finding that only 1% of banks had higher uninsured leverage. Yet, they added, uninsured deposit withdrawals could force more banks to sell their holdings in a “fire sale,” putting them at risk of insolvency.

    “Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk,” they noted.

    The researchers didn’t disclose the names of the banks it identified as at risk, but noted that one large unnamed bank with assets of over $1 trillion could face insolvency issues if uninsured depositors withdrew funds. 

    How does Credit Suisse’s problems play into this?

    Many of Credit Suisse’s problems were unique and unlike the weaknesses that brought down Silicon Valley Bank and Signature Bank in the U.S., including high interest rates. 

    Credit Suisse has faced an array of troubles in recent years, including bad bets on hedge funds, repeated shakeups of its top management and a spying scandal involving rival UBS, which on Sunday said it would buy Credit Suisse.

    Analysts and financial leaders say safeguards are stronger since the 2008 global financial crisis and that banks worldwide have plenty of available cash and support from central banks. But concerns about risks to the deal, losses for some investors and Credit Suisse’s falling market value could renew fears about the health of banks.

    How do I know if my bank — and money— are at risk?

    Bank runs are to some extent unpredictable, but experts recommend looking at your bank’s financials, including its share of uninsured deposits, to help gauge risk. 

    As mentioned, SVB had a fairly high share of uninsured deposits, a trait that is shared by some other regional banks, such as First Republic. That information can be found in a bank’s annual report by searching for the phrase “uninsured deposits.” 

    Another issue to look for is the so-called Texas Ratio, according to DepositAccounts.com. This compares the total value of at-risk loans to the total value of available funds to cover these loans. Six U.S. banks and thrifts had a Texas Ratio above 100% in the fourth quarter, according to S&P Equity — all relatively small banks, including Tampa State Bank in Kansas and Bank of Lafayette in Georgia.

    Deposits are insured up to $250,000 by the FDIC, therefore depositors with funds above that amount in a single account at one bank are at greater risk if their bank fails. There are several steps you can take to reduce that risk, though, such as opening accounts at several banks. 

    —With reporting by the Associated Press.

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  • Banks are running scared. Is the Federal Reserve about to make things worse?

    Banks are running scared. Is the Federal Reserve about to make things worse?

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    The lightning collapse of three banks and financial industry rescue of a fourth has put a spotlight on the Federal Reserve’s decision this week over whether to continue raising interest rates.

    Just two weeks after Fed Chair Jerome Powell suggested rates could rise even higher than previously projected in a bid to quash inflation, many analysts expect a no more than 0.25 percentage-point hike, while some experts are urging policy makers to hold the line for fear of further unsettling the banking system.

    “Expectations for the March [Federal Open Market Committee] meeting have changed abruptly over the last 10 days,” analysts at Goldman Sachs wrote in a note on Monday, referring to the Fed panel that sets interest rates. “We expect the FOMC to pause at its March meeting this week because of stress in the banking system. While policymakers have responded aggressively to shore up the financial system, markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient.”

    The quandary highlights the multiple, and conflicting, issues facing the Fed. With key sectors of the economy going strong and inflation still more than double the Fed’s target rate of 2%, the central bank is keenly aware that any sign it is relenting in the battle against inflation could give rise to another wave of price increases. 

    At the same time, lifting the federal funds rate now could magnify the kind of problems at other lenders that led panicked depositors to yank their money out of Silicon Valley Bank. 

    “A financial accident has happened, and we are going from no landing to a hard landing,” Torsten Slok, chief economist at private equity firm Apollo Global Management, said in a note last week that predicted the Fed will keep rates steady when officials meet March 21-22.

    Kathy Bostjancic, chief economist at Nationwide, also thinks the current stress on the nation’s banking system could make Fed officials think twice about hiking rates.

    “Many people, even myself, had been surprised that the Fed raised rates by [4.5 percentage] points in 11 months and nothing did break. It’s finally vindicating the view that the Fed can’t raise rates that fast without something happening,” she told CBS MoneyWatch.

    The Treasury problem

    While SVB failed partly because of financial missteps, analysts say rising interest rates played a critical role in its collapse. Flooded with customer deposits during the pandemic, the bank grew rapidly and put much of these funds into long-term Treasury bonds and mortgage securities. 

    But as the Fed jacked up rates, SVB’s investments lost value. That left the bank short on deposits just as customers spooked by SVB’s potential losses were rushing to withdraw their money. The concern now is that this pattern could repeat itself at other banks ill-prepared for further rate hikes.

    “We’re also seeing fear of balance-sheet issues at regional banks,” Bostjancic said. “There’s definitely evidence that banks, as they’ve received this tremendous inflow of deposits, a significant amount went into Treasury securities. There are other banks that are facing that issue.”

    Already, some customers at small and regional banks are moving their funds to the largest institutions, Financial Times correspondent Stephen Gandel told CBS News.


    Large banks see influx of new depositors following SVB collapse

    05:59

    Did the Fed make this mess?

    What led to SVB’s fast growth in deposits in the first place? More Americans were flush with cash in the early years of the pandemic, while the tech industry saw explosive growth. According to economists, both factors were fueled by the government’s response to the COVID-19 crisis: hosing consumers and businesses down with cash, while also keeping interest rates at zero for many months after the initial crisis in 2020 had passed.

    The danger now is that the Fed, having stepped on the gas too hard in recent years to keep the economy motoring forward, is now stomping on the brakes and risking a crash. 

    “Like the poor fool, the U.S. Federal Reserve overreacted to the inflation cold spell during the COVID crisis by easing financial conditions too far for too long,” Will Denyer of Gavekal Research wrote in a note. “The risk now is that the Fed has cranked the handle too far the other way … tightening conditions so much that it has initiated a disinflationary process that will overshoot to the downside, likely causing a recession.” 

    Financial conditions tightening

    The Fed’s main tool for controlling inflation is to use its benchmark overnight lending rate to slow the economy. But many economists say inflation is now cooling enough on its own without the need for additional help from the Fed, especially given the lag between monetary policy and economic growth. The current tumult in banking and in financial markets will also make lenders far more cautious, further containing inflationary pressures. 

    “Going forward banks, especially small and medium-sized banks, are likely to tighten their credit standards significantly,” Nationwide’s Bostjancic predicted. “Fed officials need to consider that more cautious bank lending will be an additional brake on economic activity, and it could be significant.”


    Former FDIC chair Sheila Bair on turmoil in the banking sector

    06:15

    By contrast, the Fed could very well decide that it has done enough to shore up the banking system following the collapse of SVB and New York’s Signature Bank and continue pushing up interest rates. After those failures, the Fed created a new lending program effectively insuring other banks’ Treasury holdings against losses for up to a year. 

    The upshot: The central bank could choose to stay the course on rate hikes as a sign of confidence in its policy measures and of its unremitting commitment to lower inflation.

    “What decision sends a message that they’re still cautious about inflation and believe in the stability of the banking system? What message portrays stability and confidence?” asked Ed Mills, Washington analyst at Raymond James. “I think the Fed is fine having another week to digest that.”

    “The banking industry works on confidence as much as it works on capital, and the banking industry is very well-capitalized at this point,” Mills added. “But there is a real question about confidence.”

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  • Silicon Valley Bank left a void that won’t easily be filled | CNN Business

    Silicon Valley Bank left a void that won’t easily be filled | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    It’s difficult to overstate the influence that Silicon Valley Bank had over the startup world and the ripple effect its collapse this month had on the global tech sector and banking system.

    While SVB was largely known as a regional bank to those outside of the tight-knit venture capital sphere, within certain circles it had become an integral part of the community – a bank that managed the idiosyncrasies of the tech world and helped pave the way for the Silicon Valley-based boom that has consumed much of the economy over the past three decades.

    SVB’s collapse was the largest bank failure since the 2008 financial crisis: It was the 16th largest bank in the country, holding about $342 billion in client funds and $74 billion in loans.

    At the time of its collapse, about half of all US venture-backed technology and life science firms were banking with SVB. In total, it was the bank for about 2,500 venture firms including Andreessen Horowitz, Sequoia Capital, Bain Capital and Insight Partners.

    But the influence of SVB went beyond lending and banking – former CEO Gregory Becker sat on the boards of numerous tech advocacy groups in the Bay Area. He chaired the TechNet trade association and the Silicon Valley Leadership Group, was a director of the Federal Reserve Bank of San Francisco and served on the United States Department of Commerce’s Digital Economy Board of Advisors.

    There’s no doubt that the failure of Silicon Valley Bank left a large void in tech. The question is how that gap will be filled.

    To find out, Before the Bell spoke with Ahmad Thomas, president and CEO of the Silicon Valley Leadership Group. The influential advocacy group is working to convene its hundreds of member companies – including Amazon, Bank of America, BlackRock, Google, Microsoft and Meta – to discuss what happens next.

    This interview has been edited for length and clarity.

    Before the Bell: What’s the feeling on the ground with tech and VC leadership in Silicon Valley?

    Ahmad Thomas: Silicon Valley Bank has been a key part of our fabric here for four decades. SVB was truly a pillar of the community and the innovation economy. The absence of SVB – that void – and coalescing leaders to fill that void is where my energy is focused and that is not a small task.

    I would say there was a fairly high level of unease a few days ago, and I believe the swift steps taken by leaders in Washington have helped quell a fair amount of that unease, but looking at Credit Suisse and First Republic just over the last couple of days, clearly we are in a situation that is going to continue to develop in the weeks and months ahead.

    So how do you fill it?

    We’re working to be a voice around stability, particularly about the fundamentals of the innovation economy. We can acknowledge the void given the absence of Silicon Valley Bank, but I do think we need voices out there to be very clear in highlighting that the fundamentals and the innovation infrastructure remains robust here in Silicon Valley.

    This is a moment where I think people need to take a step back, let cooler heads prevail, and understand that there are opportunities both from an investment standpoint, a community engagement standpoint and corporate citizenship standpoint for new leaders in Silicon Valley to step up.

    Are you working to advocate for more permanent regulation in DC?

    It’s far too early for that. But if there are opportunities to enhance access to capital to entrepreneurs to founders of color or in marginalized communities and if there are opportunities to try and drive innovation and economic growth, we will always be at the table for those conversations.

    Do you have any ideas about how long this crisis will continue for? What’s your outlook?

    The problem is twofold: A crisis of confidence and the set of economic conditions on the ground. The economic conditions remain volatile for a variety of reasons: The softening economy, inflationary pressures and the interest rate environment. But I think right now we need to focus on stabilizing confidence in the investor community, in our business executive community and in the broader set of stakeholders around the strength of the innovation economy. That is something we need to shore up near term.

    From CNN’s Mark Thompson

    Switzerland’s biggest bank, UBS, has agreed to buy its ailing rival Credit Suisse (CS) in an emergency rescue deal aimed at stemming financial market panic unleashed by the failure of two American banks earlier this month.

    “UBS today announced the takeover of Credit Suisse,” the Swiss National Bank said in a statement. It said the rescue would “secure financial stability and protect the Swiss economy.”

    UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank was worth when markets closed on Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for stock that was worth 1.86 Swiss francs on Friday.

    Extraordinarily, the deal will not need the approval of shareholders after the Swiss government agreed to change the law to remove any uncertainty about the deal.

    Credit Suisse had been losing the trust of investors and customers for years. In 2022, it recorded its worst loss since the global financial crisis. But confidence collapsed last week after it acknowledged “material weakness” in its bookkeeping and as the demise of Silicon Valley Bank and Signature Bank spread fear about weaker institutions at a time when soaring interest rates have undermined the value of some financial assets.

    Read more here.

    From CNN’s David Goldman

    A week after Signature Bank failed, the Federal Deposit Insurance Corporation said it has sold most of its deposits to Flagstar Bank, a subsidiary of New York Community Bank.

    On Monday, Signature Bank’s 40 branches will begin operating as Flagstar Bank. Signature customers won’t need to make any changes to do their banking Monday.

    New York Community Bank bought substantially all of Signature’s deposits and a total of $38.4 billion worth of the company’s assets. That includes $12.9 billion of Signature’s loans, which New York Community Bank purchased at a steep discount -— it paid just $2.7 billion for them. New York Community Bank also paid the FDIC stock that could be worth up to $300 million.

    At the end of last year, Signature had more than $110 billion worth of assets, including $88.6 billion of deposits, showing how the run against the bank two weeks ago led to a massive decline in deposits.

    Not included in the transaction is about $60 billion in other assets, which will remain in the FDIC’s receivership. It also doesn’t include $4 billion in deposits from Signature’s digital bank business.

    Read more here.

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  • The FDIC and Silicon Valley Bank | 60 Minutes

    The FDIC and Silicon Valley Bank | 60 Minutes

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    The FDIC and Silicon Valley Bank | 60 Minutes – CBS News


    Watch CBS News



    When the FDIC seized Silicon Valley Bank and New York’s Signature Bank, last weekend, it was a reminder of how fragile our banking system can be. Fourteen years ago, 60 Minutes witnessed how far the federal government will go to protect bank depositors.

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    Get browser notifications for breaking news, live events, and exclusive reporting.


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  • Failed Signature Bank will be taken over by New York Community Bancorp

    Failed Signature Bank will be taken over by New York Community Bancorp

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    Signature Bank, which collapsed last week in the wake of Silicon Valley Bank’s failure, will be taken over by New York Community Bancorp, the Federal Deposit Insurance Corporation (FDIC) announced Sunday. With deposits of $88.6 billion and more than $110 billion in assets at the end of 2022, Signature Bank’s collapse is considered the third-largest bank failure in U.S. history.

    “The (FDIC) entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank, National Association, by Flagstar Bank, National Association, Hicksville, New York, a wholly owned subsidiary of New York Community Bancorp, Inc., Westbury, New York,” the FDIC said in a statement. Signature Bridge Bank was created by the FDIC to take over Signature Bank’s operations it was closed by New York state regulators last week.

    New York Community Bancorp will operate the 40 former Signature Bank branches under the name Flagstar Bank — one of the company’s subsidiaries — beginning Monday, and the FDIC has assured depositors that the banks will be operating like normal.

    “Customers of Signature Bridge Bank, N.A., should continue to use their current branch until they receive notice from the assuming institution that full-service banking is available at branches of Flagstar Bank, N.A.,” the FDIC said.

    “Today’s transaction included the purchase of about $38.4 billion of Signature Bridge Bank, N.A.’s assets, including loans of $12.9 billion purchased at a discount of $2.7 billion,” continued the FDIC. “Approximately $60 billion in loans will remain in the receivership for later disposition by the FDIC.”

    New York Community Bancorp acquired Flagstar in December of last year, making it the 24th largest regional bank in the country at the time of acquisition according to a press release.

    The back-to-back failures of both Signature Bank and Silicon Valley Bank sparked nationwide fears of a domino effect bank collapse, but the federal government has stepped in to attempt to pay back depositors and broker sales of the failed institutions to functional banks. 

    The FDIC has estimated that the overall cost of Signature Bank’s failure to its Deposit Insurance Fund will be around $2.5 billion, with the exact cost to be determined when the FDIC’s receivership is officially terminated.

    C Mandler


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    C Mandler is a social media producer and trending topics writer for CBS News, focusing on American politics and LGBTQ+ issues.

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  • Opinion: The SVB collapse doesn’t have to be the first in a chain of many | CNN

    Opinion: The SVB collapse doesn’t have to be the first in a chain of many | CNN

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    Editor’s Note: Lanhee J. Chen is a regular contributor to CNN Opinion and the David and Diane Steffy fellow in American Public Policy Studies at the Hoover Institution. He was a candidate for California state controller in 2022. He has played senior roles in both Republican and Democratic presidential administrations and has been an adviser to four presidential campaigns, including as policy director of 2012 Mitt Romney-Paul Ryan campaign. The views expressed in this commentary are his own. View more opinion on CNN.



    CNN
     — 

    When Silicon Valley Bank collapsed this month, analysts and policymakers quickly began considering how to prevent similar failures from happening in the future. While there are changes that lawmakers should consider, when it comes to financial regulation, history shows us that politicians are usually reacting to the last crisis and one step behind the next one.

    The savings and loan crisis of the 1980s led to passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which closed insolvent financial institutions, created new regulatory agencies and implemented restrictions on how savings and loan (or thrift) institutions could invest deposited funds.

    The 2007-2008 financial crisis led to passage of the sweeping Dodd-Frank Act in 2010, which revamped federal regulation of the financial services sector and placed restrictions on how banks do business. Amid criticism that Dodd-Frank had gone too far in regulating banks, a bipartisan coalition in Congress passed, and then-President Donald Trump signed into law in 2018, some rollbacks of Dodd-Frank’s requirements pertaining to small and midsize financial institutions.

    Democrats have largely blamed this rollback of regulations for SVB’s demise. Many Republicans, for their part, have focused their aim on whether the bank’s leadership spent too much time pursuing “woke” policies on diversity and sustainability rather than ensuring depositors were protected.

    The fact that there is so little overlap between Republican and Democrat critiques in the wake of SVB’s collapse illuminates the challenging road ahead for bipartisan policy solutions to avert a future similar failure. If the two sides can’t even agree on the principal cause of the bank’s failure, it’s unlikely there will be consensus on the policies needed to shore up the financial system for the future.

    But they should. While Democrats generally favor more aggressive oversight of the financial system and Republicans largely argue that the current regulatory scheme is sufficient, the right answer looking ahead is somewhere in between.

    In the wake of SVB’s failure, some regulatory interventions have come into focus and could form the basis of policy discussions in the coming weeks and months as Congress considers how to respond to the current banking crisis.

    First, SVB’s demise came when a lack of liquidity (or a shortfall of cash on hand) left it unable to pay out depositors when they came looking for their money. The bank had invested a disproportionate amount of assets in long-term debt that was purchased at a time when interest rates were much lower than they are today. When the bank attempted to liquidate this debt over the last few weeks, it was forced to do so at a significant loss. SVB failed to hedge against risk by diversifying its investments.

    When depositors tried to withdraw $42 billion in cash from the bank on a single day, SVB’s cash shortfall generated a panic among those who had deposits at the bank and raised concerns about the health of the US banking system more broadly.

    Just as individual investors are often advised to diversify their investment strategies to minimize risk, so too might politicians look to requirements that banks ensure that they have proper diversification in how they are investing their assets.

    Further, some Republicans and many Democrats are also calling for expanded deposit insurance so that bank deposits over the current federal cap of $250,000 are also insured. Democratic Sen. Elizabeth Warren of Massachusetts, a vocal supporter of increased financial sector regulation, has called for increased deposit insurance that would be paid for by banks. Democratic Rep. Ro Khanna of California is expected soon to introduce legislation that raises or removes the insurance cap entirely, such that deposits of all amounts will be protected.

    Some Republicans have joined them in addressing the insurance cap. Republican Sen. J.D. Vance of Ohio, for example, has argued that lifting the cap (for example, by ensuring the cap keeps up with inflation) would equalize the playing field between large banks and smaller local and regional ones. Republican Sen. Mitt Romney of Utah has suggested that larger depositors might be insured up to the entire amount of their deposits in exchange for a small fee.

    If Congress moves toward increasing or eliminating the deposit insurance cap entirely, it should do so carefully. Depending on how the policy is constructed, such changes could disproportionately benefit wealthier institutional depositors or encourage bad behavior by banks if they know an open-ended bailout is waiting on the other end of risky investment decisions.

    Finally, some changes will undoubtedly come through the Federal Reserve, rather than Congress. This is probably a good thing, as these policymakers have some insulation from the political forces that directly affect lawmakers.

    The Federal Reserve, for example, will likely examine the extent of both capital and liquidity requirements at banks based on their total assets. A bank’s capital is the difference between its assets and liabilities or, put another way, the resources a bank has to ultimately absorb losses. Liquidity, by comparison, is a measure of the cash and assets a bank has immediately on hand to pay obligations (such as money that depositors might ask for).

    America’s central bank may also look at the content of “stress tests” created by the Dodd-Frank Act and designed to regularly assess the health of large financial institutions across the country. For nearly a decade, tests have been benchmarked to a low-interest rate environment, which is not reflective of recent conditions.

    But ultimately, the Federal Reserve is not blameless in the collapse of SVB as it created a fertile environment for the bank’s failure by keeping interest rates as low as they were for as long as they were. Lawmakers should do their part to make sure people understand that monetary policy has far-reaching impacts.

    While the best way to prevent the next SVB is likely to be viewed by policymakers through partisan-tinted glasses, there are avenues for Democrats and Republicans to work together. But the window to do so is narrow and closing. This time next year, we’ll be in the throes of presidential primary elections, and neither party will be particularly interested in compromise — even if that’s what our financial system needs.

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  • UBS to purchase Credit Suisse amid fallout from U.S. bank collapses

    UBS to purchase Credit Suisse amid fallout from U.S. bank collapses

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    The banking giant UBS has agreed to purchase Credit Suisse, a smaller rival, Swiss authorities announced on Sunday. The historic deal comes as major financial institutions continue to grapple with the fallout from the sudden collapse of Silicon Valley Bank earlier this month, and work to stave off a broader crisis.

    “This takeover was made possible with the support of the Swiss federal government, the Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank,” the Swiss National Bank said in a statement. “With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation.”

    At a news conference held Sunday afternoon to discuss the emergency purchase, Karin Keller-Sutter, president of FINMA, said “Switzerland has to take responsibilities beyond its own borders,” and added that the deal was reached in an effort to avoid “irreparable economic turmoil in Switzerland and throughout the world.” Keller-Sutter said the purchase “laid the foundations for greater stability both in Switzerland and internationally.”

    Fears about the stability of the global banking system spread across the U.S. and Europe in the wake of Silicon Valley Bank and Signature Bank’s failures, which happened less than two weeks ago ago and within days of each other. Their closures prompted rare moves by the federal government as well as some of the largest U.S. banks to shore up finances at institutions that became threatened in the turmoil. 

    Credit Suisse received almost $54 billion last week from the Swiss national bank as part of those negotiations, while a consortium of 11 massive U.S. banks, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, agreed to provide $30 billion in funding for First Republic Bank. Those four banks each agreed to contribute $5 billion, while Goldman Sachs and Morgan Stanley each agreed to give $2.5 billion and BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank each agreed to give $1 billion.

    The pledges of emergency funding on Thursday briefly interrupted what had been ongoing downturns in both banks’ stocks, which resumed the following day. On Friday, Credit Suisse’s share price slipped 7% and ended the day at $2.01.

    Britain Credit Suisse
    A woman walks past the Credit Suisse bank headquarters in London, Thursday, March 16, 2023.

    Frank Augstein / AP


    For Credit Suisse, Switzerland’s second-largest commercial bank, shares dropped 30% on the SIX stock exchange after its largest shareholder said it would not put any more money into the institution. The bank had faced problems before the U.S. banks’ failures gave rise to fear and a lack of confidence among big investors, and it announced its plans to borrow up to 50 billion francs from the national bank on Thursday.

    “This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” said Credit Suisse in a statement at the time. 

    The steep drop-off in its share prices one day earlier marked a record-low for Credit Suisse, after the Saudi National Bank told news outlets that it would not inject additional funds into the institution as it sought to avoid regulations that would become applicable with a stake in the Swiss lender above 10%. That upheaval caused an automatic freeze in trading of shares of Credit Suisse on the Swiss market and significantly impacted shares of other large European banks, with some share prices falling by double-digits.

    Despite the Swiss national bank’s move to shore up finances at Credit Suisse, analysts at Capital Economics said concerns remained about the health of the institution, especially since it has not been profitable in two years. 

    Andrew Kenningham, the chief Europe economist at Capital Economics, said in an investor note on Friday that, while Credit Suisse has a plan to restore business over the course of three years, “it is uncertain whether markets will give it that long.”

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  • Full interview: Rep. Patrick McHenry

    Full interview: Rep. Patrick McHenry

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    Full interview: Rep. Patrick McHenry – CBS News


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    Watch the full version of the interview with Rep. Patrick McHenry that aired on March 19, 2023 on “Face the Nation.”

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  • Podcast co-hosts Swisher and Galloway on the

    Podcast co-hosts Swisher and Galloway on the

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    Podcast co-hosts Swisher and Galloway on the “two Americans in Silicon Valley” – CBS News


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    Kara Swisher and Scott Galloway, the “Pivot” podcast co-hosts, tell “Face the Nation” that there was a “huge insecurity injected” into the banking system by Silicon Valley’s “constant catastrophizing” ahead of the bank’s collapse. “Do we have two Americas in Silicon Valley, and I think lawmakers and Americans are trying to ask, should we backstopping Americans or agents of chaos?” Galloway said.

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  • Confused about the bank meltdown? Here’s how to speak Wall Street | CNN Business

    Confused about the bank meltdown? Here’s how to speak Wall Street | CNN Business

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    New York
    CNN
     — 

    Wall Street can seem bewildering, given its sheer amount of jargon, banking terms, and acronyms.

    But headlines this week, from the collapse of Silicon Valley Bank to Credit Suisse’s need for a lifeline to instability at First Republic, have made the business of finance a national concern.

    So when you hear the FDIC is taking over, a Treasury portfolio is sinking or a bank was backstopped and bailed out, what exactly does that mean?

    Here’s a guide to all the key terms you’ve been hearing.

    It’s an acronym for the Federal Deposit Insurance Corporation, an independent government agency that protects depositors in banks. It’s one of the main names as banking failures play out because it can step in and make sure the institutions are operating properly.

    When a bank fails, the standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

    Providing financial support to an institution that would otherwise collapse. Bailouts are associated with government intervention, as it so famously did during the 2008 financial crisis.

    It’s important to note that though a government dispatched a rescue mission for SVB and First Republic, they were not bailed out by it.

    How easily a company or bank can turn an asset to cash without losing a ton of its value. Liquidity can be used to gauge the ability to pay off short-term loans or other bills. People feel comfortable in liquid markets because it’s generally fast and easy to buy and sell.

    The most “liquid” asset, as you can probably guess, is cash.

    Deposits are cash you put into your bank account, and withdrawals are money that’s taken out. A bank run is when a rush of clients withdraw money all at once, often due to rumor or panic.

    If a bank has a ratio above 100% (like First Republic), then it loans out more money than it has deposits. That’s not a good situation to be in.

    Investments backed by the US government – and known to be one of the safest ones out there. They include Treasury Bills, Treasury Bonds and Treasury Notes. However, Treasuries are sensitive to broader economic conditions like inflation and changing interest rates.

    The value of SVB’s Treasuries portfolio sank as interest rates rose.

    Anything that could be used to generate cash flow. That could be tangible assets like stocks and buildings, or intangible assets like brand recognition.

    Inflow is the money going into a business – think from product sales and from smart investments. Outflow is cash leaving the business.

    Technically, it’s alternative steps a business takes to meet its goals. That could include strategies like diversifying and product development.

    But what does it really mean? The company might be thinking about putting itself up for sale.

    A rapid and mass selling of a stock based on an upcoming fear – like rumors of a bank collapse.

    Cash or other rewards companies gift to their shareholders.

    An action that lets a company keep surviving. For example, Credit Suisse just got a $54 billion lifeline from the Swiss central bank, though that hasn’t entirely quelled investor fears yet. Another bank that benefited from a lifeline is First Republic, when 11 banks deposited $30 billion.

    This term is used widely in the financial sector to describe a last-resort financial protection, almost like an insurance policy. It’s a secondary source of funds through either credit support or guaranteed payment for unsubscribed shares.

    A system used by the FDIC that lets it take action on a bank crisis that could drag down the entire sector with it. Though it’s pretty rare to enact it, the FDIC used this exception to take over SVB and Signature Bank last week.

    This is the Fed’s main way to directly lend money to banks and provide them more liquidity and stability. The loans last up to 90 days. Many banks are utilizing this tool right now because the Fed made it easier to borrow from the discount window in the wake of SVB to avoid further bank runs.

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  • Struggling banks create uncertainty for Wall Street

    Struggling banks create uncertainty for Wall Street

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    Struggling banks create uncertainty for Wall Street – CBS News


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    First Republic and PacWest Bankcorp saw their share prices plummet this week as the fallout from the Silicon Valley Bank collapse continues. Meanwhile, the former parent company of Silicon Valley Bank filed for bankruptcy Friday. Nancy Cordes has more.

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  • Envestnet to unveil product to help banks avoid an SVB scenario | Bank Automation News

    Envestnet to unveil product to help banks avoid an SVB scenario | Bank Automation News

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    Envestnet is rushing to release a product Monday that is designed to help financial institutions avoid a “Silicon Valley Bank situation.”  The wealth tech giant’s new Bank Deposit Index will allow bank treasury executives to track inflows or outflows of deposits and segment them by “big, regional or small banks,” as well as consumer segments […]

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  • Will former SVB UK clients turn to neobanks? | Bank Automation News

    Will former SVB UK clients turn to neobanks? | Bank Automation News

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    LONDON — HSBC acquired Silicon Valley Bank UK earlier this week, but will those tech clients stay with HSBC or will they turn to neobanks?  That was a question from Chris Skinner, chief executive of The Finanser, on Tuesday at the FinovateEurope event in London.  “HSBC got a very good deal in my opinion as […]

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    Neil Ainger

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  • Biden Calls On Congress To Punish Executives At Failed Banks

    Biden Calls On Congress To Punish Executives At Failed Banks

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    President Joe Biden on Friday called on Congress to make it easier for regulators to punish executives at failed banks ― including by taking their bonuses away.

    Biden said federal law prevented his administration from holding banks accountable.

    “When banks fail due to mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again,” Biden said in a statement.

    Biden’s proposal follows the federal takeover of Silicon Valley Bank in California after it was unable to honor withdrawal requests from depositors last week. Federal agencies also shut down Signature Bank in New York and took the dramatic step of guaranteeing all deposits at the two banks, despite many of their values greatly exceeding the $250,000 covered by federal deposit insurance.

    The moves were designed to prevent depositors at other regional banks from yanking out their money in a panic, and the administration’s swift action drew praise from Republicans and Democrats alike on Capitol Hill.

    Lawmakers have harshly criticized Silicon Valley Bank for taking on too much risk, as well as bank regulators for failing to stop it — even though Congress passed a bipartisan law in 2018 that it was specifically warned would increase the risk a medium-sized bank would fail.

    But some members of Congress have questioned why tech industry customers of Silicon Valley Bank should be bailed out by the government, even if the costs are covered by fees on other banks.

    Biden’s announcement on Friday puts the ball back in lawmakers’ court and echoes the political rage over bonus pay going to executives at firms that got bailed out by the government following the 2008 financial crisis.

    “Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing,” Biden said.

    Pointing to reports that Silicon Valley Bank executives sold $3 million worth of company shares in the days leading up to the bank’s failure, the White House said Congress should give the Federal Deposit Insurance Corp. greater power to claw back executive pay.

    The Dodd-Frank financial reform law of 2010 gave the FDIC the ability to recoup compensation to executives at large financial institutions that fail and wind up in a new “orderly resolution” process. The White House said in a fact sheet that that power wouldn’t apply in the case of Silicon Valley Bank.

    Biden also called for the FDIC to be able to fine bank executives and ban them from holding jobs at other banks.

    Sen. Sherrod Brown (D-Ohio), chair of the Senate Banking Committee, endorsed the idea of more penalties for bankers in a statement on Friday.

    “Working people and small businesses have been forced to pay the price for executives’ arrogance and recklessness too many times before,” Brown said. “We need stronger rules to rein in risky behavior and catch incompetence.”

    This is a developing story. Please check back for updates.

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  • Who ends up paying for SVB, Signature and other bank failures?

    Who ends up paying for SVB, Signature and other bank failures?

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    The federal government’s response to the failure of Silicon Valley and Signature banks has already involved hundreds of billions of dollars, which brings into question who will end up paying for the aid.

    It could be months before the answers are fully known. 

    The Biden administration said it will guarantee uninsured deposits at both banks, while the Federal Reserve announced a new lending program for all banks that need to borrow money to pay for withdrawals. On Thursday, the Fed said banks had borrowed about $300 billion in emergency funding in the past week, with nearly half that amount going to holding companies for the two failed banks to pay depositors. The Fed did not say how many other banks borrowed money and added that it expects the loans to be repaid.

    Still, while today taxpayers bear no direct cost for the failure of Silicon Valley and Signature, other banks may have to help defray the cost of covering uninsured deposits. Over time, those banks could pass higher costs on to customers, forcing everyone to pay more for services.

    Here are some questions and answers about the cost of a bank collapse:

    How is the rescue being paid for?

    Federal regulators abruptly took over Silicon Valley Bank of California and Signature Bank of New York last week, causing fear among both companies investors and customers. The collapse of those banks sent panic shockwaves across the banking industry, creating pain for a handful of regional banks. President Biden and Treasury Secretary Janet Yellen have spent most of this week trying to reassure Americans that the U.S. banking system is safe.  

    Most of the cost will likely be covered by proceeds the Federal Deposit Insurance Corp. receives from winding down the two banks. Any costs beyond that would be paid for out of the FDIC’s deposit insurance fund.

    If necessary, the insurance fund will be replenished by a “special assessment” on banks, the FDIC, Fed and Treasury said in a joint statement. Though the cost of that assessment could ultimately be borne by bank customers, it’s not clear how much money would be involved.

    Will taxpayers be on the hook?

    President Biden has insisted that no taxpayer money will be used to resolve the crisis. Treasury Secretary Janet Yellen defended that view Thursday under tough questioning from GOP lawmakers.


    Yellen testifies on Capitol Hill as bank stocks see slight rebound

    05:51

    The Fed’s lending program to help banks pay depositors is backed by $25 billion of taxpayer funds that would cover any losses on the loans. But the Fed said it’s unlikely that the money will be needed because the loans will be backed by Treasury bonds and other safe securities as collateral.

    Even if taxpayers aren’t directly on the hook, some economists said the banks’ customers still stand to benefit from government support.

    “Saying that the taxpayer won’t pay anything ignores the fact that providing insurance to somebody who didn’t pay for insurance is a gift,” said University of Chicago economics professor Anil Kashyap. “And that’s kind of what happened.”

    So is this a bailout?

    Biden and other Democrats in Washington deny that their actions amount to a bailout.

    “It’s not a bailout as happened in 2008,” Sen. Richard Blumenthal, a Democrat from Connecticut, said this week while proposing legislation to toughen bank regulation. “It is, in effect, protection of depositors and a preventive measure to stop a run on other banks all around the country.”

    Biden has stressed that the banks’ managers will be fired and their investors will not be protected. Both banks will cease to exist. In the 2008 crisis, some financial institutions that received government financial aid, like the insurer AIG, were rescued from near-certain bankruptcy.

    Yet many economists said the depositors at Silicon Valley Bank, which included wealthy venture capitalists and tech startups, are still receiving government help.

    Many Republicans on Capitol Hill argue that smaller community banks and their customers will shoulder some of the cost.

    Banks in rural Oklahoma “are about to pay a special fee to be able to bail out millionaires in San Francisco,” Sen. James Lankford, a Republican from Oklahoma, said on the Senate floor.

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  • SVB Financial, former parent of Silicon Valley Bank, files for bankruptcy

    SVB Financial, former parent of Silicon Valley Bank, files for bankruptcy

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    Sheila Bair on banking sector turmoil


    Former FDIC chair Sheila Bair on turmoil in the banking sector

    06:15

    SVB Financial, the former parent of Silicon Valley Bank, said it filed for bankruptcy, a week after the tech-reliant bank was shut down by regulators following a run on the financial institution that drove it into insolvency.

    In a Friday statement, SVB Financial said it is no longer affiliated with Silicon Valley Bank or its private banking and wealth management unit, SVB Private, following its takeover by the Federal Deposit Insurance Corporation. Silicon Valley Bank isn’t included in the Chapter 11 filing, the company said.

    The bankruptcy filing also doesn’t include SVB Securities and SVB Capital’s funds as well as its general partner entities, the statement noted. The parent company said it is continuing to search for “strategic alternatives” for those divisions, which continue to operate and undertake business for customers. 

    “The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities,” said William Kosturos, chief restructuring officer for SVB Financial Group, in the statement.


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