Financial Crisis Averted? Feds Tell Depositors at Failed Banks: You'll Get Your Money
After the failure of Silicon Valley Bank and then Signature Bank of New York, which invested in crypto currencies, the Treasury Department and banking regulators are now promising depositors they will have access to all their funds when branches open today.
The Feds took action after damage from the second-biggest bank failure in U.S. history began to create a panic and rippled around the world.
"I think that without this, there could have been some serious runs on other banks," said William Cohen, founding partner at the news website Puck, "because there would have been a loss of confidence throughout the whole system."
The turmoil began Wednesday when Silicon Valley Bank, a major lender in the troubled tech industry, tried to sell assets to boost its balance sheet after losing money in bond investments when the Federal Reserve raised interest rates.
That panicked investors as customers raced to withdraw funds after seeing the news on social media.
The feds stepped in, tying up $150 billion in deposits and putting some banks and tech companies at risk.
Treasury Secretary Janet Yellen says the emergency measures put in place are not a bail-out because the funds will come from an FDIC account, a pool of money paid into by U.S. banks.
"We are concerned about depositors and are focused on trying to meet their needs," Yellen said.
But while depositors at the banks will be protected, stock and bondholders will not be.
The crisis had already spread to Britain where Silicon Valley Bank had a subsidiary.
The UK Treasury and the Bank of England "facilitated the sale″ of Silicon Valley Bank UK to HSBC and ensured the security of deposits.
