The Biden administration has taken an unprecedented step to restore confidence in the US banking system by ensuring that customers of the failed Silicon Valley Bank and Signature Bank will have access to their funds starting Monday.
In a joint statement, Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and Federal Deposit Insurance Corporation Chairman Martin J. Gruenberg said that the FDIC will guarantee all deposits, including uninsured funds, to prevent further bank runs and help companies that deposited large sums with the banks continue to operate.
The government has also shut down Signature Bank, a regional bank that was on the verge of collapse. Shareholders and holders of unsecured corporate bonds will not be protected by the regulators’ plan, but US taxpayers will not be liable for either facility, the regulators said.
The Fed’s Bank Term Funding Program is designed to prevent another bank from collapsing by offering banks loans for up to a year in exchange for US Treasury bonds and mortgage-backed securities that have tumbled in value.
The US government’s action has been welcomed by Wall Street investors, with Dow futures up by nearly 300 points late on Sunday. By guaranteeing the deposits, the government hopes to avoid two potentially risky scenarios: other banks with similar profiles to SVB and Signature could fail if customers lose faith, and tech companies that deposited funds with SVB could collapse if they were unable to make payroll or fund operations.
FingerLakes1.com is the region’s leading all-digital news publication. The company was founded in 1998 and has been keeping residents informed for more than two decades. Have a lead? Send it to [email protected]