With the end of Silicon Valley Bank, which collapsed
due to its incompetence, there’s been a mad scramble to comb through its
balance sheets to see how deep this hole goes. Will it lead to another
2008 financial meltdown? Will there be a bailout? How large will that
relief package be, and will it have the votes on the Hill? The good part
is that larger banks aren’t as heavily invested in the tech industry;
SVB got torpedoed by the massive volatility. So, what has been proposed
is not a bailout but also a bailout, and one that won’t cost
taxpayers anything. I’m not kidding. They’re trying to sell that
narrative. It's why Fox News' Brit Hume lambasted the Biden
administration for following economic theories based on magic and
wizardry. It also wouldn’t require congressional approval (via NBC News):
It seems this will be done at no cost to the taxpayers by the economic theory known as Magic. https://t.co/GXZYU4GSb7
— Brit Hume (@brithume) March 12, 2023
Federal
officials have announced they are guaranteeing all deposits at Silicon
Valley Bank, the tech-focused lender that U.S. authorities shut down
Friday in one of the biggest bank collapses in years.
In a joint
statement Sunday, the U.S. Treasury, the Federal Reserve and the Federal
Deposit Insurance Corp. said the extraordinary measures they were
taking to shore up SVB deposits would not come at taxpayers' expense.
Asked whether the actions constituted a “bailout,” a senior Treasury
Department official emphasized that point Sunday night.
The
government also reiterated that only SVB depositors, as well as those at
New York-based Signature Bank — a second institution it took over and
shut down — would be made whole. Shareholders of the failed banks, as
well as some bondholders, will “not be protected” by the actions, the
agencies' statement noted.
[...]
Funding for the emergency
measures will also come from selling off SVB's assets, said Morgan
Ricks, a banking professor at Vanderbilt Law School. As a result, he
said, taxpayer dollars will not be directly implicated in the backstop
measure.
[…]
The cost of covering the deposits, including
uninsured amounts in excess of the FDIC's $250,000 limit, will be paid
for in part out of the agency's Deposit Insurance Fund — a reserve that
is paid for by a quarterly fee on banks.
[…]
By
designating their backstop measures as a "systemic risk exception"
event, Washington regulators sidestepped a vote that would otherwise be
required in Congress on whether to backstop the banks' depositors.
The
"exception" designation required the approval of two-thirds of the
Federal Reserve Board of Governors, two-thirds of the board of the FDIC
and the Treasury Department in consultation with the president, Ricks
said.
[…]
The Deposit Insurance Fund’s balance was $128.2
billion as of Dec. 31. According to filings, 89% of SVB's $175 billion
in deposits, or about $156 billion, were uninsured.
Ricks said
there is no way to know yet how much the federal backstop measure will
ultimately cost, adding that it would depend in part on how much
regulators can recover from selling the banks' assets.
So, there’s a good chance that we, the taxpayer, will be footing a
portion of this relief effort, which shouldn’t happen since SVB
collapsed for their poor decisions, not least being not having a risk
assessment officer for nearly a year. They made a bet, they lost. End of
subject. The American people are done bailing out big banks, even if
this is the second-largest bank failure in American history. We’re done
TARPing up these peoples’ mess.
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