The US government struck a last-minute blow this Sunday to prevent last Friday’s bankruptcy of Silicon Valley Bank from sparking a crisis of confidence in the financial system. In a statement, the Federal Reserve, the Treasury Department and the regulator announced that they will provide additional funds to guarantee the payment of all of the institution’s insured and uninsured deposits.
“After receiving a recommendation from the boards of the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), and after consultation with the President (Joe Biden), Secretary of State (Janet) has given Yellen the green light for action that will allow the FDIC, its administration of Silicon Valley Bank in Santa Clara, California, so that all deposits are fully protected,” the statement said.
The SVB was handed over to the FDIC last Friday after its customers withdrew more than $42 billion in 10 hours Thursday, the largest outflow of deposits from a bank in recent US history. The big concern was what would happen to its deposits, which reached $175,000 million on Dec. 31: regulators guaranteed funds up to $250,000, but 96% of deposits at the California bank exceeded that number and were not guaranteed. A large chunk of that money corresponded to companies in the technology sector, many of them startups, that needed those funds to make their payments, including their employees’ payrolls.
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