The US Treasury, Federal Reserve, and the FDIC say all Silicon Valley Bank depositors will be “fully” protected, and their money will be available on March 13

U.S. Department of the Treasury 2023-03-14

Context & Ripple Effects

California regulators had already placed Silicon Valley Bank into FDIC receivership, while the FDIC initially told depositors above the insured limit to expect an advance dividend. That timetable was acute for clients facing payroll obligations.

The joint intervention replaces that partial-recovery path with full access to deposits. It also directly addresses a concentrated exposure for Circle, which had disclosed that $3.3 billion of USDC reserves remained at SVB.

First-order effects

SVB depositors, including those above the insured limit, receive full protection and access to their money on March 13 rather than waiting for an FDIC dividend.
Circle’s disclosed SVB reserve exposure is covered by the same depositor-protection decision, reducing the immediate funding disruption facing the stablecoin issuer.

Second-order effects

Companies that needed SVB balances for near-term payroll can continue operating without having to bridge an uncertain recovery process.
The Treasury, Federal Reserve, and FDIC move from resolving insured deposits alone to backstopping all SVB depositors, making their coordinated response central to confidence among the bank’s customers.

Third-order effects

The episode establishes a crisis-response precedent in which the availability of uninsured operating balances can become a joint concern for the Treasury, Federal Reserve, and FDIC when a bank failure threatens customers with immediate cash needs.
For crypto-linked firms such as Circle, banking-counterparty risk becomes inseparable from the regulatory response available when reserve deposits are trapped at a failed institution.

The trend: Bank-failure policy is being tested against the growing reliance of operating companies and digital-asset issuers on large, uninsured transaction deposits.

Discussion

@cz_binance @cz_binance on x
Given the changes in stable coins and banks, #Binance will convert the remaining of the $1 billion Industry Recovery Initiative funds from BUSD to native crypto, including #BTC, #BNB and ETH. Some fund movements will occur on-chain. Transparency.
@potus President Biden on x
At my direction, @SecYellen and my National Economic Council Director worked with banking regulators to address problems at Silicon Valley Bank and Signature Bank. I'm pleased they reached a solution that protects workers, small businesses, taxpayers, and our financial system. ht…
@bgarlinghouse Brad Garlinghouse on x
Setting the record straight on SVB Qs: Ripple had some exposure to SVB - it was a banking partner, and held some of our cash balance. Fortunately, we expect NO disruption to our day-to-day business, and already held a majority of our USD w/ a broader network of bank partners.
@nic__carter Nic Carter on x
Dear God. Barney Frank openly admits that Signature was arbitrarily shuttered despite no insolvency because regulators wanted to kill off the last major pro-crypto bank. Colossal scandal https://www.cnbc.com/... https://twitter.com/...
@jerallaire Jeremy Allaire on x
Update thread on USDC We were heartened to see the US government and financial regulators take crucial steps to mitigate risks extending from the fractional banking system. 100% of deposits from SVB are secure and will be available at banking open tomorrow.
@coinbase @coinbase on x
As of close of business Friday March 10 Coinbase had an approximately $240m balance in corporate cash at Signature. As stated by the FDIC, we expect to fully recover these funds. https://www.federalreserve.gov/ ...
@potus President Biden on x
I'm 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. I'll have more to say on this tomorrow morning.
@jessicalessin Jessica Lessin on x
For @wsj to say flat out that SVB could have failed because they added non-white men to their board shows how far behind the times (and certifiably stupid) this publication really is. It makes me so angry and very sad. WSJ readers and staff deserve better. https://twitter.com/...
@samro Sam Ro on x
lotta banks getting smoked https://finance.yahoo.com/losers https://twitter.com/...
@federalreserve @federalreserve on x
@federalreserve ... issue statement on actions to protect the U.S. economy by strengthening public confidence in our banking system, ensuring depositors' savings remain safe: https://www.federalreserve.gov/ ...
@billackman Bill Ackman on x
Our economy will not function effectively without our community and regional banking system. Therefore, the @FDICgov needs to explicitly guarantee all deposits now. Hours matter. We also need a modern version of our deposit insurance regime, but that will take some time, and... h…
@elaifresh Elai on x
This TikTok is actually an incredible summary https://twitter.com/...
@octal Ryan Lackey on x
Hey @brian_armstrong and @coinbase — after the SVB hell over the weekend, why don't you set up Coinbase as some kind of HNW + business neobank, with the “pass through assets to community banks and treasuries” as a first-class option in parallel with crypto.
@nicktimiraos Nick Timiraos on x
NEW: *Signature Bank has been closed *All depositors of Silicon Valley Bank and Signature Bank will be fully protected *Shareholders and certain unsecured debtholders will not be protected *New Fed 13(3) facility announced with $25 billion from ESF to backstop bank deposits https…
@gavinsbaker Gavin Baker on x
Wild. https://twitter.com/...
@litcapital @litcapital on x
SVB depositors on Friday vs. SVB depositors today https://twitter.com/...
@gbildson Greg Bildson🐀 on x
TIL https://finance.yahoo.com/losers https://twitter.com/...
@scottjshapiro Scott Shapiro on x
Bank runs are significant because banks are where people keep their money.
@burryarchive @burryarchive on x
https://twitter.com/...
@jimcramer Jim Cramer on x
These are not bailouts. They are a way without taxpayer money to remove the risk for those banks that invested poorly.
@jeuasommenulle JohannesBorgen on x
Why did the Fed ditch its moral hazard rethoric so quickly ? Concern about the silicon valley ecosystem or contagion to other regional banks is a possibility. But this is a possibility too. Maybe they don't want to be forced by the market into a no hike scenario https://twitter.c…
@modestproposal1 @modestproposal1 on x
No matter how SVB was resolved, large deposits were going move from banks that need them to banks that don't. From small and regionals to money centers. So credit will tighten, and many banks need new funding sources. BTFP meant to buy time but markets are pressing the issue. htt…
@neil_irwin Neil Irwin on x
Notable that the new Bank Term Funding Facility allows banks to pledge collateral at par. Meaning holdings of long-dated Treasuries or MBS with mark-to-market losses can unlock liquidity based on original value. https://www.federalreserve.gov/ ...
@bobeunlimited Bob Elliott on x
The US banking system is built on the expectation that equity and bond holders accept the bank economic risk and depositors, particularly the small folks, do not. While that is not legally the structure, its important to keep in mind that's functionally how it works. Thread.
@jason @jason on x
@LiebermanAustin @DavidSacks 1. I would say collectively, the people who rang the fire alarm when they witnessed the fire had an impact. 2. Interestingly, All In has a very big listenership in DC and it is a top 10 podcast in the world... it's possible that our discussion had a v…
@jasonfurman Jason Furman on x
Regulators probably needed to do what they did to prevent potentially chaotic damage across the economy. But make not mistake—it does have an expected cost to taxpayers. And changing the rules ex post like this means the rules were wrong ex ante. Going forward need to:
@semil @semil on x
“We can't rely on market discipline now, we're gonna have to rely more on regulatory discipline.” - Larry Summers today: https://www.youtube.com/...
@tracyalloway Tracy Alloway on x
Internal Silicon Valley Bank documents show the bank debating whether to cut back on bond risk as early as 2020. The catch: millions of dollars worth of lost income. https://www.bloomberg.com/... with @jennysurane & @kjspeakstruth https://twitter.com/...
@danprimack Dan Primack on x
What to know: 1/ Fed is backstopping all SVB depositors. Everyone gets access to everything tomorrow. Crisis averted. 2/ There does not yet appear to be a deal to sell any part of SVB.
@fedguy12 Joseph Wang on x
In 2008 the banks got rich, went bust, and got bailed out. It was unfair, so we created a regulatory system to prevent it from happening. SVB is a minor bank. We could have let the process play out and show how the system has been improved. But it seems nothing has changed https:…
@jasonfurman Jason Furman on x
P.S. I'm not particularly worried about moral hazard. The CEO, management & Board all losing their jobs. Equity going to zero. Bondholders won't be paid in full. These are all the entities that can effectively monitor, is unrealistic to expect depositors to do much monitoring.
@danprimack Dan Primack on x
FDIC should publicly say who made the bid and why it was rejected (or at least the latter, if the exact name is subject to an NDA). https://twitter.com/...
@cburniske Chris Burniske on x
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank said. “We became the poster boy because there was no insolvency based on the fundamentals.” https://www.cnbc.com/...
@cburniske Chris Burniske on x
For his part, Frank, who helped draft the landmark Dodd-Frank Act after the 2008 financial crisis, said there was “no real objective reason” that Signature had to be seized. https://www.cnbc.com/...
@texasvc Aziz Gilani🫡 on x
2/ For more context SVB had $342B in client funds. It was brought down by $42B in withdrawals. Some VCs hit the panic button, many didn't.
@macroalf Alf on x
Massive announcement by the Fed and US policymakers. The gist: all depositors of SVB and Signature Bank made whole, and a new facility to provide liquidity to banks under stress. A short thread. 1/
@federalreserve @federalreserve on x
@federalreserve announces Bank Term Funding Program (BTFP) to support American businesses and households, assure banks have ability to meet needs of all their depositors: https://www.federalreserve.gov/ ...
@ingridlunden Ingrid on x
The VC division has $9.5B in assets under management. The Securities team worked with 500+ businesses on nearly 700 deals. Wonder who will be snapping them up. https://twitter.com/...
@petercontibrown Peter Conti-Brown on x
“Bailout” is a pejorative term with no clear conceptual meaning (never mind that it has no legal meaning at all). But if bailout means government elimination of downside after private capture of upside then, yes, uninsured SVB depositors were bailed out. https://twitter.com/...
@chrisjbakke Chris Bakke on x
Jason Calacanis is the kind of guy who updates his LinkedIn tonight with: “Successfully assisted with the M&A process of Silicon Valley Bank, the 16th largest US bank, with over $150B in deposits.”
@lloydblankfein Lloyd Blankfein on x
A few banks may have issues like SVB, but only a few. Govt actions removed reasons for bank runs. Biggest banks have much tougher regulation and stress testing. Anxiety and volatility high, but sharply lower interest rates, fed likely on hold, are strong positives for markets.
@gavinsbaker Gavin Baker on x
Impressive. https://twitter.com/...
@nycsouthpaw @nycsouthpaw on x
*doing a press conference* We are pleased to announce the cost will not be borne by US taxpayers, but uhh by *flipping through back pages of binder* well, yes, ah hah!, indirectly, by the ... customers of the US banking system. So errrrm that's pretty much the same thing.
@charliebilello Charlie Bilello on x
The 2-year US Treasury yield is down over 100 bps in the last 3 trading days (5.05% -> 4.04%), the largest 3-day decline in yields since the October 1987 stock market crash.
@salehamohsin Saleha Mohsin on x
Biden says investors in the failed banks will “not be protected” “They knowingly took a risk and when the risk didn't pay off investors lose their money. That's how capitalism works” https://twitter.com/...
@dogetoshi Steven on x
You, a banker, holding decades old institutions: -50% Me, an idiot, holding digital magic beans founded by a 15 year old yesterday: +500%

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