US Treasury official says banks not being bailed out, depositors are being protected

A senior US Treasury official:

• The firms are not being bailed out, the depositors are being protected
• SVB equity and bondholders will be wiped out

More:

• Steps on SVB were taken to stablilize the financial system and protect depositors
• Yellen made decision on SVB after receiving recommendation from Fed, FDIC, and after consulting Biden
• Yellen, other officials continuing to monitor situation closely, as well as health of broader banking system
• Continue to see considerable strength in our economy, and economy remains in good shape
• We will continue to take steps to ensure financial system remains strong
• Will work with congress and financial regulators to consider additional actions to further strengthen financial system
• Things have moved very quickly over the weekend, we recognized the urgency of getting information out
• Systemic risk exception used for SVB, similar one used for signature
• Signature resolution will not require costs to be borne by taxpayer
• Determined it was better to use systemic risk exception, rely on deposit insurance fund and get information out to depositors before Monday
• Funds in the deposit insurance fund are 'fully sufficient'
• In time, may look back and assess whether changes needed to deposit insurance fund
• US actions were for silicon valley bank not entire holding company
• Keeping payrolls working could have large implications for the economy and access to credit for small businesses
• Actions taken were aimed at limiting consequences of deposit outflows from silicon valley and signature, reduce spillover effects

Of note on the new Bank Term Funding Program (BTFP),

• allows banks to pledge collateral at par
• this means holdings of long-dated Treasuries or MBS with mark-to-market losses can unlock liquidity based on original value

bailout Bailout A bailout is defined as a provision or mechanism of financial assistance to either a corporation or country in a bid to avert bankruptcy. The term became popularized during the global financial crisis in the United States following the passage of massive stimulus packages. A common example for many involved the bailout given the to the US automotive sector in 2009 to help avert its collapse, given the importance it held in the US economy. For example, the automotive company General Motors was gi A bailout is defined as a provision or mechanism of financial assistance to either a corporation or country in a bid to avert bankruptcy. The term became popularized during the global financial crisis in the United States following the passage of massive stimulus packages. A common example for many involved the bailout given the to the US automotive sector in 2009 to help avert its collapse, given the importance it held in the US economy. For example, the automotive company General Motors was gi Read this Term