The federal government Sunday announced the failure of a second bank with deep ties to the tech industry — as regulators rushed to attempt to stem the losses attributable to last week’s collapse of Silicon Valley Bank.
Manhattan-based Signature Bank — a key financial institution for the cryptocurrency industry — was shut down over a “similar systemic risk exception,” based on a joint statement from the heads of the US Treasury, Federal Reserve and Federal Deposit Insurance Corp.
Silicon and Signature depositors can be made whole, however the banks’ shareholders and unsecured debtors is not going to be protected, officials said.
Signature Bank was closed Sunday by its state chartering authority.REUTERS
The Federal Reserve said it can create a recent Bank Term Funding Program to supply depository institutions loans of up to 1 12 months, backed by US Treasury securities and other assets, to assist the banks.
The feds said the steps they’re taking “will be sure 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 fashion that promotes strong and sustainable economic growth.”
The California-based Silicon Valley had $209 billion in assets when it failed Friday, while Signature Bank had greater than $110 billion.
The bank was a Latest York-based cryptocurrency friendly financial institution.REUTERS
Silicon was the second largest bank to collapse in US history, after Washington Mutual in 2008. Signature was the third-largest.
President Biden on Sunday praised the feds for locating a “prompt solution” that “ensures that taxpayer dollars are usually not put in danger.”
“The American people and American businesses can have faith that their bank deposits can be there after they need them,” Biden said.
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But hedge funder Thomas Hayes of Great Hill Capital told The Post, “It only took two days of seeing regional banks crash to do the appropriate thing.”
A tech insider added, “Regulators blew it badly in letting it get to this, but this was one of the best strategy to prevent contagion.”
A banking source in San Francisco called the developments “good for depositors, but it surely is more regulation — and it moves us closer to nationalizing banking.”
Meanwhile, Signature bank executives are calling wealthy clients, begging them to remain, and telling them “your money is protected here,” a source told The Post.
“I used to be able to pull all the pieces, now I’m reconsidering. There’s no promise anywhere else is safer,” the source said. “I’m still going to be pulling some money… we shouldn’t need to even have that conversation.”
The federal government’s extraordinary motion got here hours after Treasury Secretary Janet Yellen publicly said the federal government wouldn’t bail out Silicon Valley Bank, a favourite of tech startups focused on climate change, in addition to California wineries.
Appearing on CBS’ “Face the Nation,” Yellen balked at a government rescue of the nation’s Sixteenth-largest bank, as was done for a whole lot of institutions in 2008 over the subprime mortgage meltdown.
“In the course of the financial crisis, there have been investors and owners of systemic large banks that were bailed out,” Yellen said. “And the reforms which have been put in place signifies that we’re not going to try this again.”
Signature bank had about $110.36 billion in total assets and $88.59 billion in deposits as of Dec. 31, 2022.REUTERS
Yellen also insisted that officials were “concerned about depositors and are focused on trying to fulfill their needs.”
“I’ve been working all weekend with our banking regulators to design appropriate policies to handle this example,” Yellen said. “I can’t really provide further details right now.”
Yellen’s subsequent statement with Fed Chair Jerome Power and FDIC Chairman Martin Gruenberg said taxpayers wouldn’t need to cover any of the banks’ losses, an apparent reference to the Bank Term Funding Program.
Customers were widely expected to make a Monday morning run on Silicon Valley Bank and potentially many others.
Fox Business senior correspondent Charlie Gasparino tweeted Sunday afternoon that “major financial players” had told the White House “to expect significant bank runs and large market turbulence Monday barring an answer to SVB collapse.”
“Businesses realizing that their short-term deposits w banks are in jeopardy on account of @FDICgovlimits. Theyre preparing to yank money out of mid-sized financial institutions Mon, banking execs say,” he wrote.
Earlier, Gasparino, a Post columnist, tweeted that depositors were “being told they may receive 30% to 50% of their money on Monday,” citing bankers with knowledge of the situation.
Gasparino added that bank customers will get “most of the remaining over time if there isn’t a solution ie complete @FDICgov coverage or sale.”
Hedge fund billionaire Bill Ackman of Pershing Square Capital Management also raised the specter of an enormous economic meltdown in a rambling, 649-word tweet Saturday morning that warned the federal government had “about 48 hours to repair a soon-to-be-irreversible mistake.”
“Absent @jpmorgan@citi or @BankofAmerica acquiring SVB before the open on Monday, a prospect I feel to be unlikely, or the gov’t guaranteeing all of ’s deposits, the large sucking sound you’ll hear can be the withdrawal of substantially all uninsured deposits from all however the ‘systemically necessary banks’ (SIBs),” the activist investor wrote.
“These withdrawals will drain liquidity from community, regional and other banks and start the destruction of those necessary institutions.”
During an appearance on “Fox & Friends,” Gasparino called the collapse of Silicon Valley Bank “a warning sign of just how screwed up the plumbing in our banking system and our economy is.
“I mean, let’s mean rewind videotape a bit of bit here. You recognize, we’ve had years and years of printing money by the Federal Reserve. Way an excessive amount of,” he said.“Even once we were coming out of the pandemic, we had the Biden administration spending a variety of money. You recognize, you do stuff like that, you mess with the economy like that…you’re gonna have some, some stuff that happens.”
Additional reporting by Jesse O’Neill and Post wires
