By now I am sure many people are aware of the Federal Deposit Insurance Corporation’s (FDIC) takeover of three failed banks: Silicon Valley Bank (SVB), Signature Bank, and Silver Gate. The banks failed when they did not have the funds in reserve to pay depositors who needed to withdraw their money loaned to the bank. During the Pandemic the Federal Reserve removed the requirement for banks to maintain a reserve on their deposits. The Biden Administration determined that the pandemic emergency was over in 2022, but the banks are still not required to maintain a reserve which would make them better able to handle a crisis. Ninety percent of the deposits at SVB were not insured by the FDIC. The customers have been told that they will be made whole for the full amount that they have on deposit at the bank, even if it is more than the FDIC’s $250,000 cap. President Biden and Treasury Secretary Yellen have assured the public that this is not a bail out. No taxpayer dollars are being given to the banks. I think it may be too early to tell. The plan that they came up with over the weekend to cover depositors could work if the next bank run isn’t more than $25 billion which is the amount currently proposed for this fund. The problem is that there are over $1 trillion of uninsured funds among banks in the U.S.
Silicon Valley Bank—here we go again
Silicon Valley Bank—here we go again
Silicon Valley Bank—here we go again
By now I am sure many people are aware of the Federal Deposit Insurance Corporation’s (FDIC) takeover of three failed banks: Silicon Valley Bank (SVB), Signature Bank, and Silver Gate. The banks failed when they did not have the funds in reserve to pay depositors who needed to withdraw their money loaned to the bank. During the Pandemic the Federal Reserve removed the requirement for banks to maintain a reserve on their deposits. The Biden Administration determined that the pandemic emergency was over in 2022, but the banks are still not required to maintain a reserve which would make them better able to handle a crisis. Ninety percent of the deposits at SVB were not insured by the FDIC. The customers have been told that they will be made whole for the full amount that they have on deposit at the bank, even if it is more than the FDIC’s $250,000 cap. President Biden and Treasury Secretary Yellen have assured the public that this is not a bail out. No taxpayer dollars are being given to the banks. I think it may be too early to tell. The plan that they came up with over the weekend to cover depositors could work if the next bank run isn’t more than $25 billion which is the amount currently proposed for this fund. The problem is that there are over $1 trillion of uninsured funds among banks in the U.S.