3rd FDIC-Insured Bank Fails in 5 Days but Feds Avoid Black Monday by Bailing Out Depositors

by Brian Shilhavy
Editor, Health Impact News

Sunday morning U.S. Treasury Secretary Janet Yellen appeared on Sunday talk shows to announce that the Fed was NOT bailing out Silicon Valley Bank or any other banks, as they did in 2008.

However, faced with the possibility of bank runs and a Black Monday collapse of the stock market, the Feds apparently reversed course (or maybe this was their intention all along?) and did just exactly what they said they would not do, and put into place a program to bail out depositors who were not covered by the FDIC’s limit of $250k per account.

The FDIC also closed another bank, Signature Bank in New York, but assured depositors that they could get all of their money out of their accounts on Monday.

And it worked, as futures trading that began Sunday night jumped up, instead of crashing, and Wall Street breathed a deep sigh of relief.

We now have had 3 FDIC-insured banks fail in 5 days, but it doesn’t matter if your account was insured or not, as the Fed is just going to give everyone their money back.

So the financial Armageddon has been postponed, again. The Big Tech billionaires, like Mark Cuban, whined and complained over the weekend that the Fed was not stepping in to save them, so the Fed obliged.

The banking system has been saved, for now, so the $billions can continue to pour into Wall Street to fund the military industrial complex to continue their wars, as well as $billions flowing into Big Pharma to keep funding never-ending emergency use authorizations for new drugs and vaccines.

This won’t fix the systemic problem with our financial system, but at least depositors should be able to get access to their money Monday, even though that money will be worth far less than what it was worth on Friday.

Get ready for the mass consolidation of the banking industry now and the rollouts of Digital IDs and eventually Central Bank Digital Currencies (CBDCs).

Fed Panics: Signature Bank Closed By Regulators; Fed, TSY, FDIC Announce Another Banking System Bailout

by ZeroHedge News

Panic is finally here.

On Friday, we said that the Fed will have to make an announcement before the Monday open, and we didn’t have to wait that long: in fact, the Fed waited just 15 minutes after futures opened for trading to announce the new bailout, alongside even more shocking news: the Treasury announced that New York State regulators are shuttering Signature Bank – a major New York bank – adding that all depositors both at Signature Bank, and also the now insolvent Silicon Valley Bank, will have access to their money on Monday.

And as we process the shock of yet another small bank failure (which makes JPMorgan even bigger), the Fed just issued a statement saying that “to support American businesses and households, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions  to help assure banks have the ability to meet the needs of all their depositors.  This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy.”

The Fed also said that it is prepared to address any liquidity pressures that may arise, which in turn has just unveiled the first bailout acronym of the new crisis: the Bank Term Funding Program, or BTFP. Some more details:

The financing will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.  These assets will be valued at par.  The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.

The Fed explains that the Department of the Treasury will make available “up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP.” And while the Federal Reserve – which was completely clueless about this banking crisis until Thursday  – does not anticipate that it will be necessary to draw on these backstop funds, we anticipate that the final number of needed backstop liquidity be somewhere north of $2 trillion.

More from the Fed statement:

After receiving a recommendation from the boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, Treasury Secretary Yellen, after consultation with the President, approved actions to enable the FDIC to complete its resolution of Silicon Valley Bank in a manner that fully protects all depositors, both insured and uninsured.  These actions will reduce stress across the financial system, support financial stability and minimize any impact on businesses, households, taxpayers, and the broader economy.

The Board is carefully monitoring developments in financial markets.  The capital and liquidity positions of the U.S. banking system are strong and the U.S. financial system is resilient.

Depository institutions may obtain liquidity against a wide range of collateral through the discount window, which remains open and available.  In addition, the discount window will apply the same margins used for the securities eligible for the BTFP, further increasing lendable value at the window.

The Board is closely monitoring conditions across the financial system and is prepared to use its full range of tools to support households and businesses, and will take additional steps as appropriate.

But wait, there’s more: concurrently with the Fed’s statement, the Treasury also issued a joint statement with the Fed and FDIC in which Powell, Yellen and Gruenberg all said that they are “taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”

Additionally, the trio announced that all depositors at Silicon Valley Bank will be bailed out, as will the depositors of New York’s Signature Bank, which has just failed as well, and whose depositors will be made whole after invoking a “systemic risk exception”

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13.  No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole.  As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

While depositors are safe, creditors and equity holders are not:

Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

The conclusion:

The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.

Translation: the Fed’s hiking cycle is dead and buried, and here comes the next round of massive liquidity injections. It also means that the Fed, Treasury and FDIC have just experienced the most devastating humiliation in recent history – just 4 days ago Powell was telling Congress he could hike 50bps and here we are now using taxpayer funds to bail out banks that have collapsed because they couldn’t even handle 4.75% and somehow the Fed has no idea!

To summarize:

• 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

As we said earlier on twitter, “this is a regulatory failure of historic proportions by both the Fed and Treasury. Instead of preventing billions in losses, the Fed was worrying about board diversity and Yellen was flying to Ukraine. Everyone should be sacked immediately.”

Oh, and if the Fed really thinks that $25 billion from the ESF will be enough to backstop a bank run on $18 trillion of deposits…

… we wish them the best of luck.

Read the full article at ZeroHedge News.

https://healthimpactnews.com/2023/3rd-fdic-insured-bank-fails-in-5-days-but-feds-avoid-black-monday-by-bailing-out-depositors/