US guarantees all deposits after Silicon Valley Bank collapse, as Biden promises action

 
INA-sources
 
US financial regulators rolled out emergency measures Sunday night to stem potential contagion from the collapse of Silicon Valley Bank. The measures include ensuring that depositors with the failed bank would have access to all their money on Monday morning.
 
Regulators announced the measure in a joint statement from the treasury secretary, Janet Yellen, the Federal Reserve chair, Jerome Powell, and the Federal Deposit Insurance Corporation (FDIC) chair, Martin Gruenberg.
 
“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,” they said in a statement.
 
US authorities on March 10, 2023, shut SBV to protect depositors and will reopen branches on March 13 under a federally-run entity, US and California officials. California-based SVB was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver of the funds, the FDIC said.
The announcement came as Signature Bank was closed on Sunday by regulators, the second to fail in a week. Depositors in Signature would also be made whole, the statement said.
 
“Rationally, this should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age,” said Capital Economics analyst Paul Ashworth. “But contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work.”
 
Banks will also now be allowed to borrow essentially unlimited amounts from the Federal Reserve for the next year, as long as the loans are matched by safe government securities, a way to prevent financial firms from having to sell a class of investments that have been losing value because of the Fed’s own high interest rate policies.
 
This means banks will be able to easily access depositors cash, without having to sell government bonds that have fallen in value over the last year, as interest rates have risen.
 
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” Joe Biden said in a statement. The president is set to speak on Monday, to lay out how the US will maintain a resilient banking system.
 
“I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
 
Source: The Guardian