Treasury, regulators unveil rescue for bank depositors

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“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,” Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and FDIC Chair Martin Gruenberg said in a statement. “Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”

The dramatic moves marked an attempt by the Biden administration and regulators to contain possible financial contagion triggered by Silicon Valley Bank’s sudden collapse on Friday.

Over the weekend, the FDIC collected bids on the assets of Silicon Valley Bank in a race to offer a path forward for businesses whose funds are stuck at the failed lender, according to three industry sources familiar with the matter.

It could provide a mechanism for thousands of venture-backed startups and health care businesses, which had been customers of the defunct Northern California bank, to recover their money.

A bank run sparked by uncertainty over SVB’s finances wiped out more than $42 billion of deposits from its balance sheet last week, prompting California regulators and the FDIC to intervene.

The collapse of the bank, which was seized by FDIC last week, has heightened fears of instability at small and mid-sized financial institutions.

Lawmakers and industry groups have been pressing the FDIC — as well as Treasury, the Federal Reserve and the Office of the Comptroller of the Currency — to produce a plan as soon as possible that might offer guidance to depositors on how to proceed.

Prominent venture capitalists and startup executives have warned that they’ll be unable to make payroll if the federal government doesn’t offer a dividend to the bank’s uninsured depositors — whose accounts total more than $150 billion. FDIC insurance only backstops individual deposits up to $250,000.

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( With inputs from : www.politico.com )

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