Former Federal Deposit Insurance Corporation (FDIC) chair Sheila Bair has said that Silicon Valley Bank (SVB) received a “bailout” out from the federal government following its collapse last week.
Bair, who played a prominent role in the government’s response to the financial crisis of 2008–09, was asked if the decision amounted to a “bailout.”
“Well, it is a bailout—different people define ‘bailouts’ in different ways,” Bair said. “We have a set of rules, we give a lot of support to banks; deposit insurance is one of the things we let banks have—they pay a premium for it, it’s capped at $250,000. If we change those rules for a couple of banks and then give them more coverage than anybody else gets, or they were entitled to under the law, I think that’s a bailout.”
The FDIC is an independent government agency that oversees the banking industry and works to ensure stability and confidence in the U.S. financial system.
‘All Depositors’ Will Be ’Made Whole’
Depositors with amounts beyond the threshold, therefore, are generally left in a state of limbo and looking at what could potentially be a serious loss.However, the FDIC, Treasury Department, and the Federal Reserve said on Sunday that “all depositors”—even those with accounts above the threshold—at Silicon Valley Bank, as well as Signature Bank, will be “made whole.”
Officials stressed that no losses associated with the resolution of the two financial institutions will be borne by the taxpayer, adding that the decision was made in order to “protect the U.S. economy by strengthening public confidence in our banking system.”
While speaking to Fox, Bair said that regional banks appear to be stable, but called on regulators to provide greater clarity about why they provided systemic risk exceptions for uninsured deposits at both of the failed banks.
Biden Administration Says Government Bailout Planned
“I don’t think anybody thinks that community banks are going to get a systemic risk exception to protect their uninsured deposit. So, there are a lot of issues of fairness and equity around this, and I sympathize with the regulators. They had to make some fast decisions, but, boy, I think we need some better communication and clarity about why these two institutions were systemic, and if there’s a broader problem, why aren’t you taking broader steps,” she added.Bair’s comments come shortly after Treasury Secretary Janet Yellen said that the government would not bail out SVB, as it did with other financial institutions during the previous financial crisis, but noted that regulators are working to ensure people and businesses with money in the failed bank would not be impacted by its collapse.