Former executives from <a href="https://www.dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a> and Signature Bank told members of the <a href="https://www.dailywire.com/topic/u-s-senate" target="_blank" rel="noopener">Senate</a> on Tuesday that their <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">institutions</a> failed as a result of panic from depositors.
The implosion of Silicon Valley Bank, where the vast majority of account balances exceeded the $250,000 threshold backed by the Federal Deposit Insurance Corporation (FDIC), prompted the government-backed company to <a href="https://www.dailywire.com/news/financial-authorities-announce-buyer-for-collapsed-silicon-valley-bank" target="_blank" rel="noopener">secure</a> insured and uninsured accounts in early March to prevent additional bank runs. Signature Bank nevertheless collapsed days later, while other regional financial institutions continued to languish, and First Republic Bank, a third medium-sized institution, was <a href="https://www.dailywire.com/news/jpmorgan-chase-the-nations-largest-bank-acquires-first-republic-bank-after-government-takeover" target="_blank" rel="noopener">sold</a> earlier this month in a deal brokered by regulators.
Former Silicon Valley Bank CEO Greg Becker said in <a href="https://www.banking.senate.gov/imo/media/doc/Becker%20Testimony%205-16-23.pdf" target="_blank" rel="noopener">remarks</a> before the Senate Banking Committee that the firm was “adequately capitalized” before the sale of a portfolio that had diminished in value due to Federal Reserve actions to increase the target federal funds rate, which in turn raised interest rates across the economy. He added that withdrawals started as Silvergate Bank, a company that served cryptocurrency users, decided to “voluntarily wind down and liquidate,” inducing fears among Silicon Valley Bank depositors.
The comments differed from a landmark <a href="https://www.dailywire.com/news/federal-reserve-reveals-why-silicon-valley-bank-collapsed" target="_blank" rel="noopener">report</a> published last month by the Federal Reserve, which concluded that the implosion of the bank was a “textbook case of mismanagement” as senior leadership “failed to manage basic interest rate and liquidity risk” and board members “failed to oversee senior leadership and hold them accountable.”
Former Signature Bank President Eric Howell meanwhile <a href="https://www.banking.senate.gov/imo/media/doc/Howell%20Testimony%205-16-23.pdf" target="_blank" rel="noopener">insisted</a> to lawmakers that his firm was “well-capitalized, solvent, and had sufficient borrowing capacity” before the FDIC seized control of the company. Former Signature Bank Chairman Scott Shay <a href="https://www.banking.senate.gov/imo/media/doc/Shay%20Testimony%205-16-23.pdf" target="_blank" rel="noopener">added</a> that the volatility in the cryptocurrency sector likewise translated to panic among the company’s depositors and prompted the rapid withdrawals despite a “solid plan to continue in operation.”
Lawmakers referenced the analysis from the Federal Reserve as they contended that Becker and the other executives should return their executive compensation. Sen. Elizabeth Warren (D-MA) said she filed legislation that would <a href="https://twitter.com/SenWarren/status/1658529112737079296" target="_blank" rel="noopener">confiscate</a> payment from executives who “blow up their banks,” while Sen. Tim Scott (R-SC) noted that Silicon Valley Bank had several <a href="https://twitter.com/SenatorTimScott/status/1658532908775223298" target="_blank" rel="noopener">open</a> risk management positions at the time of the company’s failure, asserting that managers were “more focused on chasing profitability than stability.”
President Joe Biden previously <a href="https://www.dailywire.com/news/biden-calls-for-crackdown-on-senior-bank-executives" target="_blank" rel="noopener">said</a> that members of Congress should increase federal authority to “hold senior management accountable when their banks fail” or enter into the control of regulators. Current law allows the FDIC to prohibit bank executives from receiving new positions at other banks if they engage in “willful or continuing disregard for the safety and soundness” of their institution; administration officials called on lawmakers to “strengthen this tool by lowering the legal standard for imposing this prohibition,” as well as expand authorization for the FDIC to collect fines “when their actions contribute to the failure of their firms.”
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Other regional banks, such as PacWest and Western Alliance, have witnessed significant turmoil in the stock market and increased withdrawal levels in recent weeks. Nearly half of Americans are presently concerned about the security of their bank deposits, according to a recent <a href="https://www.dailywire.com/news/confidence-in-american-banks-is-low-amid-continued-financial-sector-tumult" target="_blank" rel="noopener">survey</a> from Gallup, even as the FDIC will continue backing small accounts.

Elizabeth Warren

Executives Behind Failed Banks Tell Lawmakers Why The Companies Collapsed

Executives Behind Failed Banks Give Their Account Of Why The Companies Collapsed

Banks

Congress

Economy

Federal Reserve

Senate

Silicon Valley Bank

Officials at the <a href="https://www.dailywire.com/topic/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> concluded on Friday that <a href="http://dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a> collapsed last month because executives failed to properly assess <a href="http://dailywire.com/topic/economy" target="_blank" rel="noopener">macroeconomic</a> risk and volatility within the technology sector, upon which the firm was heavily reliant.
The implosion of Silicon Valley Bank, where the vast majority of account balances exceeded the $250,000 threshold backed by the FDIC, prompted the government-backed company to <a href="https://www.dailywire.com/news/financial-authorities-announce-buyer-for-collapsed-silicon-valley-bank" target="_blank" rel="noopener">secure</a> both insured and uninsured accounts at the firm in order to prevent additional bank runs. Signature Bank nevertheless collapsed days later, while other regional financial institutions such as First Republic Bank continue to <a href="https://www.dailywire.com/news/first-republic-bank-shares-plummet-after-more-than-40-of-depositors-pull-their-funds" target="_blank" rel="noopener">languish</a> as confidence in the sector diminishes.
Silicon Valley Bank imploded because of a “textbook case of mismanagement” as senior leadership “failed to manage basic interest rate and liquidity risk” and board members “failed to oversee senior leadership and hold them accountable,” according to a landmark <a href="https://www.federalreserve.gov/publications/files/svb-review-20230428.pdf" target="_blank" rel="noopener">review</a> of the crisis released by the Federal Reserve, which is responsible for regulating private banks.
“Silicon Valley Bank was a highly vulnerable firm in ways that both its board of directors and senior management did not fully appreciate,” officials said in the report. “These vulnerabilities, foundational and widespread managerial weaknesses, a highly concentrated business model, and a reliance on uninsured deposits, left Silicon Valley Bank acutely exposed to the specific combination of rising interest rates and slowing activity in the technology sector that materialized in 2022 and early 2023.”
Monetary policymakers have worked to increase the target federal funds rate over the past year in an effort to combat inflation by hiking interest rates across the economy, prompting heavy losses when Silicon Valley Bank sold a long-term bond portfolio to fund withdrawals. Assets in the overall banking system are now $2 trillion lower than their book value due to the elevated interest rates, according to a recent <a href="https://www.dailywire.com/news/nearly-200-other-banks-vulnerable-to-svb-style-collapse-study-says" target="_blank" rel="noopener">study</a> from the National Bureau of Economic Research.
Silicon Valley Bank relied heavily on technology companies, many of which suddenly demanded to withdraw funds when a handful of venture capital firms voiced concerns about the financial institution’s solvency. The review added that Silicon Valley Bank “failed its own internal liquidity stress tests and did not have workable plans to access liquidity” amid volatile moments.
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“Silicon Valley Bank managed interest rate risks with a focus on short-run profits and protection from potential rate decreases, and removed interest rate hedges, rather than managing long-run risks and the risk of rising rates,” the review continued. “In both cases, the bank changed its own risk-management assumptions to reduce how these risks were measured rather than fully addressing the underlying risks.”
Officials at the Federal Reserve concluded in a meeting last month that the turmoil in the financial system which started with the Silicon Valley Bank collapse warrants a recession forecast for the end of the year, according to <a href="https://www.dailywire.com/news/federal-reserve-officials-reveal-when-they-expect-a-recession-to-strike" target="_blank" rel="noopener">minutes</a> released by the Federal Open Market Committee and the Federal Reserve Board of Governors. The review acknowledged that central bankers “did not appreciate the seriousness of critical deficiencies in the firm’s governance, liquidity, and interest rate risk management,” meaning that the Silicon Valley Bank retained solid ratings even as “conditions deteriorated and significant risk to the firm’s safety and soundness emerged.”

Federal Reserve Releases Review Detailing Why Silicon Valley Bank Collapsed

Federal Reserve Concludes Silicon Valley Bank Imploded From Mismanagement

U.S.

<a href="http://dailywire.com/topic/stock-market" target="_blank" rel="noopener">Shares</a> of First Republic Bank continued to plummet this week after the <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">company</a> revealed that deposits plummeted 40.8% in the first quarter of this year.
First Republic Bank, headquartered in San Francisco, California, caters mainly to wealthy clients with account balances above the $250,000 deposit threshold backed by the Federal Deposit Insurance Corporation. It witnessed many customers withdraw their funds as unease gripped the financial sector last month. Deposits at the company have decreased from $176 billion on December 31 to $104 billion on March 31, according to the company’s first quarter <a href="https://ir.firstrepublic.com/static-files/013f57fb-b980-4353-bbb3-0e7a3b27f20a#:~:text=Total%20revenues%20were%20%241.2%20billion,an%20increase%20in%20noninterest%20income." target="_blank" rel="noopener">earnings report</a>.
“With the stabilization of our deposit base and the strength of our credit quality and capital position, we continue to take steps to strengthen our business,” First Republic Bank Chairman Jim Herbert and First Republic Bank CEO Mike Roffler insisted in the report. “We remain fully committed to serving our communities, and we are grateful for the ongoing support of our clients and colleagues.”
The $104 billion in deposits on March 31 included a $30 billion loan <a href="https://www.dailywire.com/news/big-banks-will-rescue-collapsing-first-republic-bank-with-30-billion-deal" target="_blank" rel="noopener">provided</a> by large financial institutions such as Wells Fargo, JPMorgan Chase, Bank of America, and Citigroup at the end of last month, a deal that the federal government enabled to maintain the solvency of First Republic Bank. Deposits would have declined at least 57.8% without the agreement.
The company’s stock price, which declined 88.5% between the beginning of the year and the end of the first quarter, fell an additional 57.6% between Monday and Wednesday, marking an overall 94.4% price decrease from $121.54 to $6.79.
First Republic Bank is presently “taking actions to strengthen its business and restructure its balance sheet,” such as increasing insured deposits, decreasing borrowed funds from the Federal Reserve, and reducing loan balances to “correspond with the reduced reliance on uninsured deposits,” according to the earnings report. The firm will therefore reduce employee headcount between 20% and 25% in the second quarter, reduce executive compensation and consolidate corporate office space.
The dismal performance of First Republic Bank, one of the multiple regional banks to languish amid the sudden failure of competitors Silicon Valley Bank and Signature Bank last month, reignited fears of instability in the financial sector leading to a broader crisis. The implosion of the latter two institutions, where the vast majority of account balances likewise exceeded the $250,000 deposit insurance threshold, prompted financial regulators to secure insured and uninsured accounts to prevent additional bank runs.
Funds have been flowing toward larger banks amid uncertainty about the status of some medium-sized banks, prompting additional concerns about increased consolidation in the sector.
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Treasury Secretary Janet Yellen has been <a href="https://www.dailywire.com/news/yellen-walks-back-implicit-support-for-large-bank-account-holders-prompts-investor-unease" target="_blank" rel="noopener">accused</a> of offering mixed signals on whether the government will continue backing both insured and uninsured deposits: she vowed in <a href="https://home.treasury.gov/news/press-releases/jy1354" target="_blank" rel="noopener">remarks</a> to the American Bankers Association that moves similar to the one which protected Silicon Valley Bank customers “could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” but she later <a href="https://www.youtube.com/watch?v=0_iw_Vc-T6I" target="_blank" rel="noopener">told</a> the Senate Appropriations Committee that she has “not considered or discussed anything” related to “blanket insurance or guarantees of all deposits.”
Assets in the banking system are meanwhile $2 trillion lower than their book value as a result of Federal Reserve efforts to implement a rollback in monetary stimulus, which had been previously maintained to stimulate the economy during the lockdown-induced recession, according to a <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.

First Republic Bank

First Republic Bank Shares Plummet After Report That More Than 40% Of Depositors Pulled Their Funds

Stock Market

Sen. <a href="https://www.dailywire.com/topic/elizabeth-warren" target="_blank" rel="noopener">Elizabeth Warren</a> (D-MA) and Rep. <a href="https://www.dailywire.com/topic/alexandria-ocasio-cortez" target="_blank" rel="noopener">Alexandria Ocasio-Cortez</a> (D-NY) sent letters to large depositors of collapsed <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">financial</a> institution <a href="http://dailywire.com/topic/silicon-valley-bank?_gl=1*1k8vnbd*_ga*NzUzNDA5ODIxLjE2NzkzMjkzNzM.*_ga_CZKR9ZYKJP*MTY4MTE1MTI2Ni44MC4xLjE2ODExNTcxMDYuNDkuMC4w" target="_blank" rel="noopener">Silicon Valley Bank</a> to ask about their approaches to risk management.
The implosion of Silicon Valley Bank, where the vast majority of account balances exceeded the $250,000 threshold backed by the Federal Deposit Insurance Corporation, prompted the government-backed company to secure all accounts at the firm last month in order to prevent additional bank runs. Some $13.3 billion of the $18 billion taken from the Deposit Insurance Fund to protect Silicon Valley Bank were <a href="https://www.dailywire.com/news/13-billion-in-silicon-valley-bank-bailout-money-went-to-just-10-accounts" target="_blank" rel="noopener">used</a> to back deposits for only 10 accounts.
Warren and Ocasio-Cortez, both of whom have been critical of bank management in the weeks after the firm’s demise, contended in <a href="https://www.warren.senate.gov/imo/media/doc/combinepdf%20(3).pdf" target="_blank" rel="noopener">letters</a> to the 14 largest depositors that Silicon Valley Bank “did not function like a normal bank” because the firm catered almost entirely to technology companies, producing an undue degree of exposure to the recently volatile sector.
The conditions enabled a handful of venture capital firms, who controlled many of the companies which held accounts at the bank, to suddenly encourage withdrawals amid signs of distress at Silicon Valley Bank.
“Congress, bank regulators, and the public are owed an explanation for the bank’s hyper-reliance on tech industry firms and investors,” the lawmakers wrote, “the extent to which this resulted in an abnormally high percentage of deposits that were not insured by FDIC, and the role that companies like yours might have played in precipitating the $42 billion single-day run.”
Reports indicated that Silicon Valley Bank maintained “white glove” treatment of some venture capital customers, provided lower-rate mortgages for startup founders, and sponsored multiple industry conferences. Silicon Valley Bank also required companies to deposit their money in exchange for venture debt agreements, then offered the deals to founders and executives.
“If the reports are accurate, these mutual backscratching arrangements could help explain why some customers placed massive, uninsured deposits,” Warren and Ocasio-Cortez continued. “And if these deposits were made by company executives and allowed by corporate boards in exchange for personal perks, that behavior raises potential concerns about whether they were meeting their fiduciary duties.”
The lawmakers asked the depositors, which included firms such as digital hardware manufacturer Roku, bankrupt cryptocurrency lender BlockFi, and gaming platform Roblox, to provide complete timelines of their relationships with Silicon Valley Bank and information about their decisions to deposit large amounts of assets with the firm.
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The collapse of Silicon Valley Bank and Signature Bank, which also had a majority of depositors with account balances exceeding the $250,000 threshold, provoked calls from some officials to introduce more regulations in the financial sector. The White House recently <a href="https://www.dailywire.com/news/biden-calls-for-crackdown-on-senior-bank-executives" target="_blank" rel="noopener">asked</a> lawmakers to introduce regulations that would “hold senior management accountable when their banks fail” or enter into the control of the FDIC, while House Financial Services Committee Chairman Patrick McHenry (R-NC) <a href="https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408652" target="_blank" rel="noopener">said</a> that he has “confidence in our financial regulators and the protections already in place to ensure the safety and soundness of our financial system.”
Warren has <a href="https://www.dailywire.com/news/top-democrats-say-fdic-should-reexamine-250000-deposit-insurance-threshold" target="_blank" rel="noopener">suggested</a> that the $250,000 deposit insurance limit should be re-examined. The FDIC funds deposit insurance through fees on covered banks rather than taxpayer dollars.

AOC, Warren Press Large Companies With Deposits At Silicon Valley Bank Over Risk Management Concerns

AOC, Warren Press Large Companies With Deposits At Silicon Valley Bank

Alexandria Ocasio-Cortez

Business

The reality is that the <a href="https://www.google.com/search?q=gop+dailywire&amp;rlz=1C5GCEM_enUS998US998&amp;oq=gop+dailywire&amp;aqs=chrome..69i57j69i60l3j69i64l3.1604j0j4&amp;sourceid=chrome&amp;ie=UTF-8" target="_blank" rel="noopener">GOP</a> can&#8217;t do much in Congress without full control of the Senate and with a Democratic president. Worse, it seems whenever the Senate GOP does do something that advances legislative action, it&#8217;s <a href="https://www.dailywire.com/news/bad-news-for-americans-bipartisanship-is-back-here-comes-amnesty" target="_blank" rel="noopener">bipartisan nonsense</a> that always advances the leftist agenda — they never seem to be able to get Democrats to move to the right.
Yet that doesn&#8217;t mean there aren&#8217;t a few bright spots worth highlighting in the nation&#8217;s capital. Consider freshman Sen. Katie Britt (R-AL), who has had a stellar week, particularly as she grilled federal bank regulators on Wednesday who say that they need more federal power in order to protect the American people from the financial crisis.
Britt scrutinized Federal Vice Chairman Michael Barr during a hearing on the collapse of Silicon Valley Bank, asking why they need more power if they haven&#8217;t used all that has been given to them.
&#8220;So you&#8217;ve talked about your review, which is ongoing. In that review, will you take a look if you used all of the tools in your toolbox to prevent this both before and after?&#8221; she asked.
Barr claimed that he would like for the formal review to be submitted before answering her inquiry — which is reasonable. Yet it raises the question, the government can&#8217;t confirm or deny it used all of its &#8220;tools&#8221; — why is it asking for more power? The GOP senator narrowed in on that point.
&#8220;I find it concerning though when you all were asked, &#8216;Would you like to see more powers, more strength?'&#8221; she pressed. &#8220;Every single one of you said yes. … I think this is what people hate about Washington: we have a crisis and you come in here without knowing whether or not you did your job, and you say you want more.&#8221; 
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">
A star is born. <a href="https://t.co/D4imLjUP7b">https://t.co/D4imLjUP7b</a>
&mdash; Tim Meads (@TimMeadsUSA) <a href="https://twitter.com/TimMeadsUSA/status/1641105223400796162?ref_src=twsrc%5Etfw">March 29, 2023</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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It&#8217;s a good question and one that the Democrats don&#8217;t have an answer to. Their knee-jerk reaction is that more government power is always the solution. Now, President Joe Biden is demanding more banking regulations — without even seeing the formal review of what happened to SVB. Thank goodness for folks like Britt who can expose that logic, or lack thereof.
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.

Senator Katie Britt

Freshman GOP Senator Katie Britt Regulates The Regulators

Biden Admin

Federal Government

Republican Women

Republicans

U.S. Senate

On March 10, Silicon Valley Bank — which lends to almost half of all the publicly traded venture capital-backed tech and healthcare companies — collapsed. It was the second largest bank failure in U.S. history, second only to Washington Mutual&#8217;s downfall in 2008.
The sudden meltdown of SVB, and the subsequent failure of Signature Bank, has sent shockwaves through the wider economy and raised questions about the soundness of the U.S. banking system.
Treasury Secretary Janet Yellen has maintained that the financial system is sound, but her vacillating <a href="https://www.dailywire.com/news/yellen-walks-back-implicit-support-for-large-bank-account-holders-prompts-investor-unease" target="_blank" rel="noopener">comments</a> on whether the government would cover all deposits even if they are over the $250,000 FDIC limit — like it did at SVB — in the event of meltdowns at other banks have left investors worried.
Meanwhile, Federal Reserve Vice Chair for Supervision Michael Barr, FDIC Chairman Martin Gruenberg, and Under Secretary of the Treasury for Domestic Finance Nellie Liang were <a href="https://www.nytimes.com/2023/03/28/business/economy/svb-banks-fed-hearing.html" target="_blank" rel="noopener">grilled</a> Tuesday by the Senate Banking Committee over why federal regulators did not recognize the warning signs preceding SVB&#8217;s collapse.
<div id="attachment_518849" style="width: 874px" class="wp-caption alignnone"><img aria-describedby="caption-attachment-518849" decoding="async" loading="lazy" class="size-large wp-image-518849" src="https://www.dailywire.com/wp-content/uploads/2023/03/GettyImages-1249695048-864x576.jpg" alt="" width="864" height="576" srcset="https://dw-wp-production.imgix.net/2023/03/GettyImages-1249695048-864x576.jpg 864w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249695048-300x200.jpg 300w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249695048-768x512.jpg 768w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249695048-1536x1024.jpg 1536w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249695048-2048x1366.jpg 2048w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249695048-1800x1200.jpg 1800w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249695048-1200x800.jpg 1200w" sizes="(max-width: 864px) 100vw, 864px" />Photographer: Samuel Corum/Bloomberg via Getty Images via Getty Images</div>
Despite her boss&#8217;s reluctance to say that the government would issue blanket guarantees for all deposits, Liang said that the government would be willing to step in again and insure all deposits if necessary to protect the overall financial system. Gruenberg also said that the FDIC would examine deposit coverage levels as part of a long-term solution.
Many of the assets held by the banks felled in the crisis have been sold to other large financial institutions. These deals — often backed by the federal government and offered at enticing discounts — have allowed large banks to grow even further by picking the carcasses of their former competitors.
The consolidation of the banking system around a few large financial institutions at the expense of smaller banks, whether by acquisition like Credit Suisse or by depositors&#8217; desire to place their money with safer (bigger) banks, could have a massive effect on the wider economy. The greater concentration of assets into banks considered &#8220;too big to fail&#8221; could incentivize riskier behavior from these institutions, making another collapse — and a backdoor bailout from the government — more likely.
SVB collapsed because of a classic bank run after a poor performance report. Depositors <a href="https://www.dailywire.com/news/regulators-shut-down-major-tech-bank-after-run-on-savings" target="_blank" rel="noopener">rushed</a> to withdraw their funds and the company suffered heavy losses from the liquidation of a long-term bond portfolio. California regulators quickly stepped in and handed the bank over to the FDIC, which established a government-backed successor corporation, Silicon Valley Bridge Bank, and appointed new senior management to facilitate the implosion.
The FDIC then promised to back all deposits at SVB, even ones exceeding the mandated $250,000 threshold, to prevent runs on similar banks.
The FDIC — through Silicon Valley Bridge Bank — is now <a href="https://www.dailywire.com/news/substantial-interest-for-collapsed-silicon-valley-bank-as-feds-auction-off-whats-left" target="_blank" rel="noopener">preparing</a> to auction off what remains of SVB, which has garnered &#8220;substantial interest from multiple parties,&#8221; according to a March 20 <a href="https://www.fdic.gov/news/press-releases/2023/pr23022.html" target="_blank" rel="noopener">press release</a>.
The bank failures were confined to mid-sized American banks until Credit Suisse in Switzerland, the eighth largest investment bank in the world, began to <a href="https://www.dailywire.com/news/shares-in-major-bank-plummet-further-after-top-investor-refuses-to-offer-aid-two-other-banks-collapse" target="_blank" rel="noopener">collapse</a> after it issued a report identifying &#8220;material weaknesses&#8221; in the institution&#8217;s risk assessment strategy. The bank had $1.3 trillion in assets under management at the end of 2022, but the company&#8217;s stock had decreased by more than 80% over the last two years. Additionally, depositors withdrew $119 billion from the bank in the fourth quarter of 2022 alone. After its stock sank further and hit an all-time low on March 14, Credit Suisse&#8217;s largest investor, Saudi National Bank, <a href="https://www.dailywire.com/news/shares-in-major-bank-plummet-further-after-top-investor-refuses-to-offer-aid-two-other-banks-collapse" target="_blank" rel="noopener">announced</a> that it would not offer any aid to the bank by purchasing more shares over its current stake.
<div id="attachment_518853" style="width: 874px" class="wp-caption alignnone"><img aria-describedby="caption-attachment-518853" decoding="async" loading="lazy" class="size-large wp-image-518853" src="https://www.dailywire.com/wp-content/uploads/2023/03/GettyImages-1249282024-864x576.jpg" alt="This photograph taken on March 24, 2023 in Geneva, shows a sign of Credit Suisse bank. - The marriage of UBS and Credit Suisse was hastily arranged to prevent a global financial meltdown -- but the size of the resulting megabank could cause domestic problems in Switzerland, the central bank admitted on March 23, 2023. (Photo by Fabrice COFFRINI / AFP) (Photo by FABRICE COFFRINI/AFP via Getty Images)" width="864" height="576" srcset="https://dw-wp-production.imgix.net/2023/03/GettyImages-1249282024-864x576.jpg 864w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249282024-300x200.jpg 300w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249282024-768x512.jpg 768w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249282024-1536x1024.jpg 1536w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249282024-2048x1365.jpg 2048w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249282024-1800x1200.jpg 1800w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249282024-1200x800.jpg 1200w" sizes="(max-width: 864px) 100vw, 864px" />FABRICE COFFRINI/AFP via Getty Images</div>
The Swiss government stepped in and offered Credit Suisse a loan worth a little over $50 billion, but <a href="https://www.cnn.com/2023/03/17/investing/credit-suisse-shares-drop-despite-lifeline/index.html">despite</a> a small rebound after the news, the bank&#8217;s stock continued its downward spiral on Friday.
UBS, another Swiss bank and the largest private bank in the world, <a href="https://apnews.com/article/credit-suisse-ubs-swiss-bank-svb-7d4c2c82b6df9830c0254ef0de62e870" target="_blank" rel="noopener">revealed</a> Sunday that it would acquire Credit Suisse for a little over $3 billion in a deal brokered by the Swiss government. Once again, Credit Suisse shares plummeted, this time over 50%. The Swiss National Bank will <a href="https://www.cnbc.com/2023/03/19/ubs-agrees-to-buy-credit-suisse-as-regulators-look-to-shore-up-global-banking-system.html" target="_blank" rel="noopener">offer</a> a loan of up to $108 billion to help UBS with the acquisition and it would also cover almost $10 billion in potential losses for UBS. The national bank&#8217;s loan and its guarantee to cover certain losses will <a href="https://www.dailywire.com/news/swiss-rescue-of-major-bank-creates-five-figure-tax-liability-for-each-citizen" target="_blank" rel="noopener">create</a> a tax liability equal to $13,500 for each Swiss citizen.
Many criticized the Swiss government&#8217;s willingness to aid in UBS&#8217; potentially lucrative acquisition with taxpayers&#8217; money.
“We are fed up with the idea that if you are big enough, you get everything,” Christoph Rechsteiner, a partner at Swiss tax consultancy MME, said in an <a href="https://www.bloomberg.com/news/articles/2023-03-21/swiss-brace-for-credit-suisse-bailout-costing-them-13-500-each" target="_blank" rel="noopener">interview</a> with Bloomberg. “The law is changed for you over a weekend.”
“The solution that has been drafted now is that if all comes good, UBS makes a huge profit,” he added. “They got Credit Suisse for nothing at all and the government is backing the losses.”
Credit Suisse is one of 30 banks around the world that are considered too integral to the international banking system to be allowed to collapse — perhaps more infamously known as &#8220;too big to fail&#8221; banks.
A similar situation is unfolding at Signature Bank, which was shut down by New York state regulators on March 12. Then, the FDIC <a href="https://www.cnbc.com/2023/03/20/fdic-announces-agreement-to-sell-signature-bank-assets.html" target="_blank" rel="noopener">revealed</a> Sunday that a subsidiary of New York Community Bancorp, Flagstar Bank, would take on almost all of Signature&#8217;s deposits. Additionally, it would also acquire some of Signatures loans — at a massive discount — and all of its 40 branches. The FDIC will retain control of $60 billion worth of loans and $4 billion in deposits.
Federal officials also <a href="https://www.dailywire.com/news/big-banks-will-rescue-collapsing-first-republic-bank-with-30-billion-deal" target="_blank" rel="noopener">enabled</a> a deal that staved off the collapse of First Republic Bank. Several financial giants, including JPMorgan Chase, Citigroup, and Bank of America, pledged to provide $30 billion worth of assistance to the struggling bank. First Republic stock plunged 73% between March 8 and 13, just as SVB and Signature tumbled, and despite the pledge of support from some of the largest banks in the world, its stock fell even further after the deal was announced.
Several analysts have <a href="https://www.dailywire.com/news/shares-in-first-republic-bank-plummet-even-after-rescue-deal-from-big-banks" target="_blank" rel="noopener">advocated</a> for the sale of First Republic to a larger institution, with one <a href="https://www.wsj.com/livecoverage/stock-market-news-today-03-17-2023/card/first-republic-still-faces-dire-outlook-analysts-say-SqHSubQsEugswRaAx1Zy" target="_blank" rel="noopener">telling</a> The Wall Street Journal that a merger “should be beneficial for the banking system as a whole, and should help ease contagion fears.”
Another said that the recent events surrounding the company paint &#8220;a very dire outlook for the company and shareholders, in our view.”
In a more ominous appraisal, an analyst from JPMorgan told the WSJ that First Republic represented &#8220;a higher risk but potentially very high reward name.&#8221;
A recent <a href="https://www.dailywire.com/news/nearly-200-other-banks-vulnerable-to-svb-style-collapse-study-says" target="_blank" rel="noopener">study</a> from the National Bureau of Economic Research found that almost 200 banks in the U.S. are vulnerable to collapse if half of all uninsured depositors demanded their funds. The number at risk for collapse expanded to over 1,600 banks if all uninsured depositors attempted to withdraw their money. The analysis indicated that the Federal Reserve&#8217;s repeated increase of the target interest rate in an effort to curb inflation was a primary factor in the current instability of the banking system. The “substantial losses in the value of banks’ long-duration assets” induced by the higher interest rates now implies that “banks are much more fragile” to runs by uninsured depositors, the customers with more than $250,000 in their combined accounts with a given financial institution.
Treasury Secretary Yellen initially <a href="https://www.dailywire.com/news/janet-yellen-admits-community-banks-in-middle-america-might-not-be-protected-like-silicon-valley-bank" target="_blank" rel="noopener">stated</a> during a March 17 Senate Finance Committee hearing that the Federal Reserve and FDIC might not cover large deposits at smaller banks like they did for SVB after Sen. James Lankford (R-OK) asked her if community banks would be insured over the limit &#8220;regardless of size.&#8221;
<div id="attachment_518858" style="width: 874px" class="wp-caption alignnone"><img aria-describedby="caption-attachment-518858" decoding="async" loading="lazy" class="size-large wp-image-518858" src="https://www.dailywire.com/wp-content/uploads/2023/03/GettyImages-1249149032-864x576.jpg" alt="Janet Yellen, US Treasury secretary, speaks during a House Appropriations Subcommittee hearing with Shalanda Young, director of the Office Of Management and Budget (OMB), right, in Washington, DC, US, on Thursday, March 23, 2023. The Treasury secretary said that regulators would be prepared for further steps to protect deposits if warranted, in new language that differs from her prepared remarks to the Senate a day earlier. Photographer: Al Drago/Bloomberg via Getty Images" width="864" height="576" srcset="https://dw-wp-production.imgix.net/2023/03/GettyImages-1249149032-864x576.jpg 864w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249149032-300x200.jpg 300w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249149032-768x512.jpg 768w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249149032-1536x1024.jpg 1536w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249149032-2048x1365.jpg 2048w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249149032-1800x1200.jpg 1800w, https://dw-wp-production.imgix.net/2023/03/GettyImages-1249149032-1200x800.jpg 1200w" sizes="(max-width: 864px) 100vw, 864px" />Al Drago/Bloomberg via Getty Images</div>
Four days later, Yellen seemed to walk that back, <a href="https://home.treasury.gov/news/press-releases/jy1354" target="_blank" rel="noopener">declaring</a> during a speech to the American Bankers Association that the &#8220;Treasury is committed to ensuring the ongoing health and competitiveness of our vibrant community and regional banking institutions&#8221; and that interventions like the one at SVB &#8220;could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.&#8221;
Only a couple of days after that, she <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">appeared</a> to buckle on the notion that the government would insure deposits above the FDIC limit at large institutions, assuring the Senate Appropriations Committee that her department has &#8220;not considered or discussed anything&#8221; related to &#8220;blanket insurance or guarantees of all deposits.&#8221;
In the hearing from March 17, Lankford observed that “We have seen the mergers of banks over the past decade. I am concerned you are about to accelerate that by encouraging anyone who has a large deposit in a community bank to say, &#8216;We are not going to make you whole, but if you go to one of our preferred banks, we will make you whole.'&#8221;
While Yellen&#8217;s official comments have cast doubt on whether or not the government will take actions that will incentivize such consolidation, its actions in response to the crisis seem to bear out Lankford&#8217;s concern. Federal regulators have facilitated deals that allow other large institutions to acquire the assets of their former competitors for reduced prices in the name of arresting the spread of &#8220;contagion&#8221; to other banks. Those banks acquire a greater percentage of the market share and, with fewer competitors and the implicit promise of hefty government assistance if things go wrong, have far more liberty to take risks than they otherwise would.
As seen in the lead-up to the Great Recession in 2007-2008, big banks with little competition and the support of federal regulators indeed tend to adopt riskier business strategies to the ultimate detriment of their depositors. While a useful stopgap measure to prevent a single bank collapse from initiating a domino effect across the whole system, the federal government&#8217;s response to the SVB crisis may, in the long term, make a wider financial catastrophe more likely and more harmful to Americans.

Photo Illustration Silicon Valley Bank (SVB)

The Government’s Response To SVB’s Collapse Could Make Another Banking Crisis More Likely — And More Destructive

The Government's Response To SVB's Collapse Could Make Another Banking Crisis More Likely — And More Destructive

Janet Yellen

Readers Pass

Federal Deposit Insurance Corporation Chairman Martin Gruenberg revealed on Monday that the firm guaranteed as much as $13.3 billion in uninsured deposits for the 10 largest <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">account</a> holders at the defunct <a href="http://dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a>.
The implosion of Silicon Valley Bank, where the vast majority of account balances exceeded the $250,000 threshold backed by the FDIC, prompted the government-backed company to secure all accounts in order to prevent additional bank runs. Silicon Valley Bank had been forced to sell a long-term bond portfolio at a substantial loss to cover deposit requests.
Gruenberg <a href="https://www.fdic.gov/news/speeches/2023/spmar2723.html" target="_blank" rel="noopener">testified</a> before the Senate Banking Committee that some $18 billion from the Deposit Insurance Fund was used to guarantee accounts at Silicon Valley Bank, while another $1.6 billion was taken from the Deposit Insurance Fund to back accounts at Signature Bank, which collapsed shortly after Silicon Valley Bank as large depositors withdrew their balances. The Deposit Insurance Fund is filled with fees on banks rather than taxpayer dollars.
Gruenberg also revealed that $13.3 billion of the $18 billion allocated to protect Silicon Valley Bank, or nearly 74% of the funds used to assist the customers, were used to back deposits for a mere 10 accounts. “The systemic risk determination enabled the FDIC to extend deposit insurance protection to all of the depositors,” he told lawmakers. “The depositors protected by the guarantee of uninsured depositors included not only small and mid-size business customers but also customers with very large account balances.”
A number of large companies kept sizable amounts of their cash assets with Silicon Valley Bank: Roku, which manufactures digital media hardware, maintained a balance of $487 million, while BlockFi, a bankrupt cryptocurrency lender, had $227 million in funds, and SunRun, a residential solar company, had $80 million in deposits, according to a <a href="https://www.reuters.com/business/finance/global-firms-with-exposure-collapsed-svb-2023-03-13/" target="_blank" rel="noopener">report</a> from Reuters.
Gruenberg added that the financial system “remains sound” despite the volatility of the past several weeks but noted that some banks are witnessing higher levels of withdrawals.
“Banks report instances of corporate depositors, in particular, moving some or all of their deposits to diversify their exposures and increase their deposit insurance coverage. Banks have also reported clients moving their deposits out of the banking system and into government money market funds,” he told lawmakers. “In general, the largest banks appear to be net beneficiaries of deposit flows, increasing the amounts on deposit, or held in custody, at the global systemically important banks and at large regional banks.”
Funds have indeed been flowing toward larger financial institutions amid uncertainty about the status of some medium-sized banks, prompting concerns about increased consolidation in the banking sector. Treasury Secretary Janet Yellen vowed in <a href="https://home.treasury.gov/news/press-releases/jy1354" target="_blank" rel="noopener">remarks</a> to the American Bankers Association last week that moves similar to the one which protected Silicon Valley Bank customers “could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.” Investors saw her comments as an implicit guarantee of all deposits, but the official later <a href="https://www.youtube.com/watch?v=0_iw_Vc-T6I" target="_blank" rel="noopener">told</a> the Senate Appropriations Committee that she has “not considered or discussed anything” related to “blanket insurance or guarantees of all deposits.”
The bond portfolio sold by Silicon Valley Bank had declined substantially in value amid Federal Reserve actions to hike interest rates. Assets in the banking system are now $2 trillion lower than their book value as a result of the rollback in monetary stimulus, which had been previously maintained to stimulate the economy during the lockdown-induced recession, according to a <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.

Recent Bank Failures and the Federal Regulatory Response

$13 Billion In Silicon Valley Bank Bailout Money Went To Just 10 Accounts

$13 Billion In Bank Bailout Money Went To 10 Accounts

This article is adapted from today’s Morning Wire Afternoon Update. To listen to the podcast version, click <a href="https://www.dailywire.com/podcasts/morning-wire" target="_blank" rel="noopener">here</a>.
Nashville School Shooting
At least six people, <a href="https://www.dailywire.com/news/female-shooter-kills-at-least-6-including-3-kids-in-nashville-christian-school-shooting" target="_blank" rel="noopener">including three children</a>, have died as the result of the mass shooting at a private Christian school in Nashville this morning. The shooter, a 28-year-old female who identified as a man, was killed in a confrontation with police. Authorities say the shooter entered The Covenant School through a side entrance and made her way to the second floor.
A reunification area was established at Woodmont Baptist Church for parents to meet their children who attend The Covenant School. Chief John Drake of the Metro Nashville Police gave some new information about the shooter during local law enforcement’s second press conference of the day:
&#8220;We have identified the suspect,&#8221; Drake said. &#8220;We are having an ongoing investigation as it pertains to her at this time.” 
&#8220;From my initial findings, is that at one point she was a student at that school,&#8221; he added. &#8220;But, unsure what year, all of that, but that&#8217;s what I&#8217;ve been told so far.&#8221; 
Israeli Protests
Massive protests and a nationwide strike erupted in Israel on Sunday. The demonstrations followed <a href="https://www.dailywire.com/news/netanyahu-returns-to-power-sworn-in-as-prime-minister-of-israel/" target="_blank" rel="noopener">Prime Minister Benjamin Netanyahu</a> removing a cabinet member opposed to his <a href="https://www.dailywire.com/news/this-is-not-the-end-of-democracy-netanyahu-wont-cave-to-leftists-will-advance-judicial-reform/" target="_blank" rel="noopener">bid to reform</a> the nation’s Supreme Court.
Netanyahu, who is seeking to expand the Israeli parliament’s lawmaking authority by curbing the Supreme Court’s power, on Sunday fired Defense Minister Yoav Gallant, who had called for a pause in the reforms. Left-wing protesters responded by blocking streets and bridges and lighting fires on roadways. 
Critics of Israel’s Supreme Court say it has too much power and is not answerable to the people. Under the <a href="https://www.dailywire.com/news/israel-is-reforming-its-judiciary-its-not-perfect-its-democracy" target="_blank" rel="noopener">proposed reforms</a>, the Knesset would have an increased role in the selection of judges and the power to override Supreme Court decisions overturning laws. 
The high court would also be forced to apply the law to cases rather than ruling based on its own “reasonability” test. Supporters say that the new system of government would provide more checks and balances, similar to the framework in the United States, but even supporters of the changes warn that forcing them through could spark more severe protests and potential violence. 
By evening local time, Netanyahu announced that he would be postponing the reforms until the summertime and seeking to find common ground for the time being.
Manhattan Grand Jury Hears From Another Trump Witness 
A Manhattan grand jury was scheduled to hear from David Pecker, the former chief executive of American Media and publisher of The National Enquirer, as it considers charges against former President Donald Trump over alleged hush money payments to Stormy Daniels. At a rally over the weekend, Trump took aim at Manhattan District Attorney Alvin Bragg.
Zombie Drug Hits Nation, Schumer Demands Federal Action
Lawmakers are warning that a new “zombie drug” known as xylazine, or Tranq, is ripping through the nation. The drug has been detected in 48 states and dozens have already overdosed in New York, leading Senate Majority Leader Chuck Schumer to request that the Drug Enforcement Administration send a special team to stop the flow of narcotics.  For its part, the DEA has said, &#8220;Xylazine is making the deadliest drug threat our country has ever faced, fentanyl, even deadlier.” 
SVB Bought By North Carolina-Based Bank
North Carolina-based First Citizens BancShares Inc. has agreed to buy a large part of Silicon Valley Bank, the largest financial institution to fail since the 2008 banking crisis. First Citizens will purchase around $72 billion of SVB’s assets at a discount of $16.5 billion. Some $90 billion in securities and other assets will remain “in receivership” with the FDIC. The FDIC said in a statement that it estimates the cost of the failure of the bank to its Deposit Insurance Fund is around $20 billion. 
Extreme Weather Threatens Southeast
Authorities are warning of severe flooding throughout the southeast as a new batch of thunderstorms, hail, and heavy rain pummeled the region into Monday afternoon. Nearly 20 million people from Houston to the Georgia coast could be impacted by the storms.
DeSantis Signs School Choice Bill
Florida Governor Ron DeSantis signed a school choice bill into law on Monday. Among other measures, the legislation will expand school choice vouchers to all students in the state and advance eligibility for school choice scholarships to all Florida residents who are eligible to enroll in a K-12 public school. The governor made the following remarks at the signing:
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">
BREAKING: DeSantis announces signing of universal school choice expansion
&quot;[It] will represent the largest expansion of education choice not only in the history of this state, but in the history of these United States. That is a big deal [&#8230;] The results speak for themselves.&quot; <a href="https://t.co/TDvqGpIsbn">pic.twitter.com/TDvqGpIsbn</a>
&mdash; Florida’s Voice (@FLVoiceNews) <a href="https://twitter.com/FLVoiceNews/status/1640366363590967299?ref_src=twsrc%5Etfw">March 27, 2023</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
To listen to the audio version of this podcast, <a href="https://podcasts.apple.com/us/podcast/morning-wire/id1576594336" target="_blank" rel="noopener">click here</a>. And for more in-depth discussion of the biggest stories of the day, listen to the latest full episode of Morning Wire every morning.

Untitled design – 2023-03-27T160625.375

Monday Afternoon Update: Nashville School Shooting, Israeli Protests, Zombie Drug Hits Nation

Drugs

Israel

Nashville

Ron DeSantis

School Shooting

First Citizens Bank will acquire <a href="http://dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a> on Monday after the latter company faced a run on deposits and collapsed.
The implosion of Silicon Valley Bank, where the vast majority of account balances exceeded the $250,000 threshold guaranteed by the Federal Deposit Insurance Corporation, also called the FDIC, prompted the government-backed company to secure all accounts to prevent additional bank runs. Silicon Valley Bank had been forced to sell a long-term bond portfolio at a substantial loss to cover deposit requests.
The FDIC revealed in a <a href="https://www.fdic.gov/news/press-releases/2023/pr23023.html" target="_blank" rel="noopener">statement</a> that the 17 branches of Silicon Valley Bank will be operated by First Citizens Bank as soon as Monday, while all depositors will automatically become account holders at the company. First Citizens Bank will purchase $72 billion of Silicon Valley Bank’s assets at a discount of $16.5 billion, while $90 billion will remain with the FDIC.
&#8220;First Citizens has a reputation for financial strength, exceptional customer service and prudent lending that spans 125 years,” <a href="https://newsroom.firstcitizens.com/2023-03-27-First-Citizens-Bank-Enters-into-Whole-Bank-Purchase-of-Silicon-Valley-Bridge-Bank,-N-A?utm_source=Sailthru&amp;utm_medium=email&amp;utm_campaign=Issue:%202023-03-27%20Breaking%20News:%20Banking%20%5Bissue:49098%5D&amp;utm_term=Banking%20Dive">said</a> First Citizens Bank CEO Frank Holding. “We have partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank, and we appreciate the confidence the FDIC has placed in us once again. We look forward to building relationships with our new customers and positioning our company for continued success as we affirm our commitment to support the integrity of our nation&#8217;s banking system.&#8221;
First Citizens Bank, based in Raleigh, North Carolina, will assume management of $56 billion in Silicon Valley Bank deposits. The failure of Silicon Valley Bank cost the Deposit Insurance Fund, which is funded by fees on banks, an estimated $20 billion.
The bond portfolio sold by Silicon Valley Bank, which regulators shuttered on March 10, had declined substantially in value amid Federal Reserve actions to hike interest rates and combat inflation. Assets in the overall banking system are now $2 trillion lower than their book value, according to a <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research, prompting worries about the stability of the sector.
Treasury Secretary Janet Yellen commented last week that withdrawals from regional banks have stabilized and asserted that the financial system remains sound.
“The American economy relies on a healthy banking system that can provide for the credit needs of families and businesses,” she said in <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">remarks</a> to the American Bankers Association. “Let me be clear: the government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe.”
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Officials shuttered Signature Bank, where a majority of account holders likewise had deposits exceeding the $250,000 insurance threshold, on March 12. New York Community Bancorp acquired the firm for more than $38 billion. It will service the defunct firm’s clients via Flagstar Bank, exacerbating fears about additional consolidation in the financial sector due to the present volatility.
The two largest banks in Switzerland, UBS and Credit Suisse, similarly <a href="https://www.dailywire.com/news/switzerlands-two-largest-banks-to-combine" target="_blank" rel="noopener">merged</a> last week as the former purchased the latter for more than $3 billion. Credit Suisse, formerly the eighth-largest investment bank in the world, had <a href="https://www.dailywire.com/news/collapsing-too-big-to-fail-bank-receives-massive-support-from-swiss-authorities" target="_blank" rel="noopener">struggled</a> over the past several years under lackluster risk and compliance management.

Financial Authorities Announce Buyer For Collapsed Silicon Valley Bank

First Citizens Bank Acquires Silicon Valley Bank

Banking

Lawmakers created the Federal Deposit Insurance Corporation, also known as the FDIC, in the first years of the Great Depression in order to prevent <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">bank</a> runs and restore faith in the financial system. Some lawmakers are considering revisions to the present deposit insurance limit of $250,000 as the <a href="http://dailywire.com/topic/economy" target="_blank" rel="noopener">economy</a> grapples with the second-largest bank failure in American history.
<a href="http://dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a> provided services to half of venture-backed technology and healthcare firms in the United States; the vast majority of customers therefore maintained deposits well above the $250,000 threshold backed by the FDIC, since businesses generally require larger sums of liquid assets to conduct operations and compensate employees.
When the FDIC was forced to take over the company on March 10, however, officials guaranteed deposits both above and below the $250,000 threshold in order to prevent bank runs at other financial institutions. Signature Bank, another company with a substantial majority of large depositors, collapsed on March 12 and was likewise taken over by the FDIC.
Sen. Elizabeth Warren (D-MA) and Rep. Maxine Waters (D-CA) have each <a href="https://www.dailywire.com/news/top-democrats-say-fdic-should-reexamine-250000-deposit-insurance-threshold" target="_blank" rel="noopener">suggested</a> in recent days that the $250,000 limit should be reexamined. Lawmakers have indeed raised the deposit insurance threshold over the years: the FDIC only offered $2,500 of deposit insurance in 1934, a threshold which gradually increased to $100,000 in 1980 before reaching $250,000 with the financial reforms that occurred amid the Great Recession in 2008. The FDIC funds deposit insurance through fees on covered banks rather than taxpayer dollars.
Treasury Secretary Janet Yellen has <a href="https://www.dailywire.com/news/yellen-walks-back-implicit-support-for-large-bank-account-holders-prompts-investor-unease" target="_blank" rel="noopener">sent</a> mixed signals about whether officials would continue to support both insured and uninsured deposits, prompting unease among some investors.
David Bahnsen, the founder of Manhattan-based wealth management firm The Bahnsen Group, told The Daily Wire that he expects authorities to maintain assumptions that there is an “implicit” unlimited amount of FDIC coverage available while leaving the codified $250,000 threshold intact. Such an approach, however, would “improperly price risk and protection, and create a moral hazard for depositors, and indeed the broader financial system.”
He added that the creation of an explicit system centered around unlimited FDIC coverage would require congressional approval, which regulators “clearly want to avoid,” as well as increased payments from the “low-margin banking system.”
Silicon Valley Bank fulfilled withdrawal requests by selling a long-term bond portfolio that had declined in value amid Federal Reserve actions over the past year to hike interest rates, moves which followed excessive monetary stimulus in response to the lockdown-induced recession. Assets in the overall banking system are now $2 trillion lower than their book value, according to a <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.
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Bahnsen noted that the fractional reserve banking system, under which financial institutions only maintain a portion of deposits immediately available since account holders generally do not need instant access to all of their funds, will always carry some degree of bank run risk. He asserted that actions from the Federal Reserve nevertheless prompted the current volatility.
“All levered finance means financial contagion risk is a very real thing when confidence falters, and faltering confidence is the ultimate self-fulfilling prophecy,” Bahnsen continued. “The two causes of the Silicon Valley Bank implosion were the Federal Reserve’s loose policy and the Federal Reserve’s tight policy. Fractional reserve banking was a problem for Silicon Valley Bank only after the Federal Reserve policies created a boom then created a bust.”

Silicon Valley Bank Collapse

As Multiple Banks Implode, Insurance Deposit Limit Receives Renewed Scrutiny 

Bank Insurance Deposit Limit Receives Renewed Scrutiny 

Treasury Department

<a href="https://www.dailywire.com/topic/treasury-department" target="_blank" rel="noopener">Treasury</a> Secretary <a href="http://dailywire.com/topic/janet-yellen?_gl=1*tcdc2g*_ga*NzUzNDA5ODIxLjE2NzkzMjkzNzM.*_ga_CZKR9ZYKJP*MTY3OTU4MTExNC4xNS4xLjE2Nzk1OTQ1NzUuNTguMC4w" target="_blank" rel="noopener">Janet Yellen</a> prompted unease among investors after she appeared to walk back comments indicating that financial authorities would guarantee large <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">bank</a> deposits.
The recent collapse of <a href="http://dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a>, where the vast majority of accounts exceeded the $250,000 threshold guaranteed by the Federal Deposit Insurance Corporation, prompted the government-backed company to secure all accounts in order to prevent additional bank runs. Some investors have called for deposit insurance for all account holders across the financial system with balances above $250,000 until the crisis subsides.
Yellen vowed in <a href="https://home.treasury.gov/news/press-releases/jy1354" target="_blank" rel="noopener">remarks</a> to the American Bankers Association on Tuesday that interventions similar to the one that protected Silicon Valley Bank account holders “could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” a comment that market actors interpreted as an implicit guarantee of all deposits. The senior Biden administration economist <a href="https://www.youtube.com/watch?v=0_iw_Vc-T6I" target="_blank" rel="noopener">told</a> the Senate Appropriations Committee on Wednesday, however, that she has “not considered or discussed anything” related to “blanket insurance or guarantees of all deposits.”
Markets slid on Wednesday afternoon as a result of the comments; officials at the Federal Reserve also <a href="https://www.dailywire.com/news/federal-reserve-hikes-target-interest-rates-by-quarter-point-as-officials-balance-fighting-inflation-and-protecting-banks" target="_blank" rel="noopener">announced</a> an expected quarter-point target interest rate hike on Wednesday.
Pershing Square Capital Management CEO Bill Ackman had <a href="https://twitter.com/BillAckman/status/1638263984313729024" target="_blank" rel="noopener">said</a> that the earlier comments from Yellen “definitely help and hopefully mitigate the need for a temporary deposit guarantee.” He later <a href="https://twitter.com/BillAckman/status/1638659841358004225" target="_blank" rel="noopener">added</a> that the statement declaring that “systemwide deposit guarantees were not being considered” had the opposite effect.
“A temporary systemwide deposit guarantee is needed to stop the bleeding,” he contended. “The longer the uncertainty continues, the more permanent the damage is to the smaller banks, and the more difficult it will be to bring their customers back.”
Ackman noted that the rise in target interest rates to 5% renders bank deposits less attractive to savers and will prompt them to lend their money so they can benefit from the higher returns. “I would be surprised if deposit outflows don’t accelerate effective immediately,” he remarked.
Silicon Valley Bank fulfilled withdrawals by selling a long-term bond portfolio that had declined substantially in value amid Federal Reserve actions to hike interest rates. Assets in the banking system are now $2 trillion lower than their book value as a result of the rollback in monetary stimulus, which had been maintained to stimulate the economy during the lockdown-induced recession, according to a <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.
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Grit Capital CEO Genevieve Roch-Decter also <a href="https://twitter.com/GRDecter/status/1638901807027044356" target="_blank" rel="noopener">noted</a> that banks increasing their exposure to the commercial real estate sector in recent years constitutes a “timebomb sitting on bank balance sheets” since projects in the industry have been harmed by remote work arrangements. “Silicon Valley Bank’s collapse was triggered by a $1.8 billion loss from its bond portfolio,” she said. “The losses from commercial real estate loans that go into default could be much, much higher.”
Confidence in the financial system has been severely impacted by the recent volatility. Only 10% of the population has a “great deal” of confidence in the individuals who lead banks, according to a <a href="https://www.dailywire.com/news/americans-faith-in-banks-plummets-amid-financial-chaos" target="_blank" rel="noopener">poll</a> from the Associated Press and the National Opinion Research Center released on Wednesday, while 30% have “hardly any” confidence and 57% have “only some” confidence. The survey, which was conducted in the days after Silicon Valley Bank collapsed, showed a decline from the 22% who had a “great deal” of confidence three years ago.

Treasury Secretary Janet Yellen Testifies In Senate Hearing On Department’s 2024 Budget Request

Yellen Walks Back Implicit Support For Large Bank Account Holders, Prompts Investor Unease

Yellen Walks Back Implicit Support For Large Bank Account Holders

Few Americans have trust in the nation’s <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">banking</a> sector following the recent collapses of <a href="http://dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a> and Signature Bank.
A mere 10% of the population has a “great deal” of confidence in the individuals who lead banks, according to a <a href="https://apnorc.org/projects/few-have-confidence-in-financial-institutions/" target="_blank" rel="noopener">poll</a> from the Associated Press and the National Opinion Research Center released on Wednesday, while 30% have “hardly any” confidence and 57% have “only some” confidence. The survey, which was conducted between March 16 and March 20, found that trust in financial firms declined from the 22% who had a “great deal” of confidence three years ago.
The sudden collapse of Silicon Valley Bank, which was closed on March 10 by regulators and is now controlled by the Federal Deposit Insurance Corporation, induced a bank run as account holders with funds that surpassed the $250,000 deposit insurance threshold withdrew their balances. Signature Bank, which was closed on March 12, likewise had a large share of account holders with deposits above $250,000.
Americans also expressed a preference for more regulation on the sector: 56% of respondents believe “government regulation of financial institutions is inadequate,” with 63% of Democrats and 51% of Republicans calling for more restrictions.
The White House recently <a href="https://www.dailywire.com/news/biden-calls-for-crackdown-on-senior-bank-executives" target="_blank" rel="noopener">asked</a> lawmakers to introduce regulations that would “hold senior management accountable when their banks fail” or enter into the control of the FDIC and vowed that “the American people and American businesses can have confidence that their bank deposits will be there when they need them.” House Financial Services Committee Chairman Patrick McHenry (R-NC) <a href="https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408652" target="_blank" rel="noopener">said</a> that he has “confidence in our financial regulators and the protections already in place to ensure the safety and soundness of our financial system.”
Another <a href="https://civicscience.com/americans-trust-in-banks-continues-to-decline-but-trust-from-major-bank-members-varies/" target="_blank" rel="noopener">survey</a> from CivicScience found that the share of Americans reporting “not very much” trust in banks soared from 34% to 39% in the days after the collapses.
Silicon Valley Bank fulfilled withdrawal requests by selling a long-term bond portfolio that had declined substantially in value amid Federal Reserve actions to hike interest rates. Assets in the overall banking system are now $2 trillion lower than their book value, according to a <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.
Treasury Secretary Janet Yellen commented on Tuesday that withdrawals from regional banks have stabilized and asserted that the financial system remains sound. “The American economy relies on a healthy banking system that can provide for the credit needs of families and businesses,” she said in <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">remarks</a> to the American Bankers Association. “Let me be clear: the government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe.”
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Some have expressed concern that the implosion of the two financial institutions would lead to further consolidation in the banking system. New York Community Bancorp acquired the former branches of Signature Bank on Sunday for more than $38 billion and will service the defunct firm’s clients via Flagstar Bank, according to a <a href="https://www.fdic.gov/news/press-releases/2023/pr23021.html" target="_blank" rel="noopener">statement</a> from the FDIC; the government-backed corporation also said there has been “substantial interest from multiple parties” with respect to the sale of Silicon Valley Bank.
The two largest banks in Switzerland, UBS and Credit Suisse, likewise <a href="https://www.dailywire.com/news/switzerlands-two-largest-banks-to-combine" target="_blank" rel="noopener">merged</a> this week as the former purchased the latter for more than $3 billion. Credit Suisse, formerly the eighth-largest investment bank in the world, had <a href="https://www.dailywire.com/news/collapsing-too-big-to-fail-bank-receives-massive-support-from-swiss-authorities" target="_blank" rel="noopener">struggled</a> over the past several years under lackluster risk and compliance management.

Americans’ Faith In Banks Plummets Amid Financial Chaos

Americans' Faith In Banks Plummets After Silicon Valley Bank Collapse

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