Federal officials have been scrambling over the weekend to prevent the fallout from the Silicon Valley Bank (SVB) bankruptcy from escalating into a crisis as financial institutions resumed operations on the morning of the 13th (local time), the New York Times (NYT) reported. reported on the 12th.
The New York Times reported that Treasury Secretary Janet Yellen tried to reassure Americans by appearing on CBS’ television that the banking system was “secure and well funded.”
The Federal Deposit Insurance Corporation (FDIC) announced on the 11th that the deadline for the SVB auction is until the 12th.
The New York Times pointed out that economists and politicians are concerned that companies with deposits that exceed insurance coverage may withdraw deposits in other regional banks for fear of losses.
Rep. Lo Khanna, who spoke with FDIC officials on the phone at 11 p.m. on the 11th, said authorities are focusing on finding a buyer for SVB, but if that fails, the federal government must find a way to guarantee full payment of deposits before financial institutions resume operations on the 13th. As reported by the NYT.
The NYT said officials throughout the 12th looked for steps they could take to absorb the shock of SVB’s bankruptcy, and it appears they decided to prioritize the sale of SVB.
After speaking with Fed Chair Jerome Powell and Treasury Secretary Yellen, House Speaker Kevin McCarthy said, “I expect a countermeasure to be announced today.”
However, the NYT said that it is difficult to say for sure that a sale of SVB can be achieved, and that it is not the only step the government can take, saying that experts say the FDIC is an “exceptional financial system crisis” as it was in 2008, and will come up with a plan to pay the full deposit. It was said that it was necessary.
The NYT pointed out that the Treasury Department, the FDIC, and the Federal Reserve Committee all have to agree to ensure the full payment of the government’s deposits, and that more than two-thirds of the concert committee members agree is the biggest hurdle. In this regard, Steven Kelly, a senior research assistant at the Yale Financial Stability Program, said that it was not clear whether the SVB bankruptcy was a crisis at a level that would adversely affect financial safety as a whole.
The NYT reported that some economists say that the Fed may step in and supply short-term funds to financial institutions if the Treasury Department approves. pointed out
The NYT explained that as a way for the authorities to reassure depositors even if the deposits are not paid in full, the Fed also provides short-term funding by collateralizing Treasury bonds held by banks.
The NYT reported that banks are reluctant to do this, but large banks have participated at the yeonjun’s recommendation when the economy was in trouble due to the corona pandemic in 2020.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.