The Silicon Valley Bank collapsed rocked the banking industry last Friday.
In an unprecedented Sunday night decision, the Federal Reserve, Treasury Department, and FDIC released a joint statement saying they will make all depositors whole — regardless of the $250,000 normal FDIC limit.
Here’s the full press release:
Washington, DC — The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:
Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.
After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.
We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.
Why did the Federal Reserve and Treasury Department cave?
According to reports, Silicon Valley Bank “served as a bridge between US capital and Chinese tech entrepreneurs.”
Is the Biden administration attempting to ensure Chinese tech start-ups and venture capitalists don’t lose their funding?
Surprise, surprise: SVB was in deep with Chinese banks and companies.
Can we all agree US taxpayers shouldn't bail out all the Chinese companies who invested in SVB?https://t.co/cHM3VMfdrg pic.twitter.com/PqAMV8x4vA
— Morgan Ortagus (@MorganOrtagus) March 13, 2023
South China Morning Post provided further details:
The collapse of Silicon Valley Bank (SVB) has created a sense of panic within China’s tech start-up and venture capital (VC) sector, as the lender served as a bridge between US capital and Chinese tech entrepreneurs.
As of Sunday afternoon, topics related to the collapse of the bank, including “SVB bankruptcy has spread to multiple countries” and “SVB bankruptcy affects Chinese entrepreneurs”, were trending on Chinese microblogging site Weibo, with posts receiving hundreds of millions of views.
“Is the 2008 Financial Crisis happening again?” said a Weibo user with the handle MaxC.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.While most tech companies and banks in China have avoided commenting publicly on the collapse, it has raised concerns among venture capitalists and start-ups in the country, many of which view the US-based bank as a golden opportunity to access the American capital market.
“Many Chinese companies listed in the US have received investment from Silicon Valley venture capital funds in their early stage,” said Zheng Lei, an adjunct professor at the Shenzhen Finance Institute of the Chinese University of Hong Kong. He added that the collapse would affect the chances of unlisted Chinese start-ups obtaining investment from Silicon Valley VC funds.
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“The collapse of SVB has lowered the trust of Chinese companies in foreign banks, so they will be more cautious when considering US dollar funds,” said Fu Jian, director of Henan Zejin Law Firm.
The Biden Crime Family remains under the microscope in the House Oversight Committee’s investigation into their business ventures.
On Sunday, House Oversight Chair Rep. James Comer (R-KY) said the committee has documents showing the Biden family received funds from the Chinese Communist Party.
House Oversight Chair James Comer Says Committee Has Documents Financially Linking Biden Family & Chinese Communist Party
Would it really be a surprise if the Biden administration is attempting to save China’s tech and venture capital sector from significant losses?
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