Regulators close Signature Bank, second shuttered by feds
Mar 12, 2023 23:05:56 GMT -5
Post by Shoshanna on Mar 12, 2023 23:05:56 GMT -5
Regulators close Signature Bank, second shuttered by feds after SVB disaster
By David Propper, Lydia Moynihan and Bruce Golding
March 12, 2023 7:41pm Updated
The federal government Sunday announced the failure of a second bank with deep ties to the tech industry — as regulators rushed to try to stem the losses caused by last week’s collapse of Silicon Valley Bank.
Manhattan-based Signature Bank — a key financial institution for the cryptocurrency industry — was shut down over a “similar systemic risk exception,” according to a joint statement from the heads of the US Treasury, Federal Reserve and Federal Deposit Insurance Corp.
Silicon and Signature depositors will be made whole, but the banks’ shareholders and unsecured debtors will not be protected, officials said.
The Federal Reserve said it will create a new Bank Term Funding Program to offer depository institutions loans of up to one year, backed by US Treasury securities and other assets, to help the banks.
The feds said the steps they are taking “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.”
The California-based Silicon Valley had $209 billion in assets when it failed Friday, while Signature Bank had more than $110 billion.
The bank was a New York-based cryptocurrency friendly financial institution.
Silicon was the second largest bank to collapse in US history, after Washington Mutual in 2008. Signature was the third-largest.
President Biden on Sunday praised the feds for finding a “prompt solution” that “ensures that taxpayer dollars are not put at risk.”
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” Biden said.
But hedge funder Thomas Hayes of Great Hill Capital told The Post, “It only took two days of seeing regional banks crash to do the right thing.”
A tech insider added, “Regulators blew it badly in letting it get to this, but this was the best way to prevent contagion.”
A banking source in San Francisco called the developments “good for depositors, but it is more regulation — and it moves us closer to nationalizing banking.”
Meanwhile, Signature bank executives are calling wealthy clients, begging them to stay, and telling them “your money is safe here,” a source told The Post.
“I was ready to pull everything, now I’m reconsidering. There’s no promise anywhere else is safer,” the source said. “I’m still going to be pulling some money… we shouldn’t have to even have that conversation.”
The government’s extraordinary action came hours after Treasury Secretary Janet Yellen publicly said the government wouldn’t bail out Silicon Valley Bank, a favorite of tech startups focused on climate change, as well as California wineries.
Appearing on CBS’ “Face the Nation,” Yellen balked at a government rescue of the nation’s 16th-largest bank, as was done for hundreds of institutions in 2008 over the subprime mortgage meltdown.
“During the financial crisis, there were investors and owners of systemic large banks that were bailed out,” Yellen said. “And the reforms that have been put in place means that we’re not going to do that again.”
Continued at link
By David Propper, Lydia Moynihan and Bruce Golding
March 12, 2023 7:41pm Updated
The federal government Sunday announced the failure of a second bank with deep ties to the tech industry — as regulators rushed to try to stem the losses caused by last week’s collapse of Silicon Valley Bank.
Manhattan-based Signature Bank — a key financial institution for the cryptocurrency industry — was shut down over a “similar systemic risk exception,” according to a joint statement from the heads of the US Treasury, Federal Reserve and Federal Deposit Insurance Corp.
Silicon and Signature depositors will be made whole, but the banks’ shareholders and unsecured debtors will not be protected, officials said.
The Federal Reserve said it will create a new Bank Term Funding Program to offer depository institutions loans of up to one year, backed by US Treasury securities and other assets, to help the banks.
The feds said the steps they are taking “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.”
The California-based Silicon Valley had $209 billion in assets when it failed Friday, while Signature Bank had more than $110 billion.
The bank was a New York-based cryptocurrency friendly financial institution.
Silicon was the second largest bank to collapse in US history, after Washington Mutual in 2008. Signature was the third-largest.
President Biden on Sunday praised the feds for finding a “prompt solution” that “ensures that taxpayer dollars are not put at risk.”
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” Biden said.
But hedge funder Thomas Hayes of Great Hill Capital told The Post, “It only took two days of seeing regional banks crash to do the right thing.”
A tech insider added, “Regulators blew it badly in letting it get to this, but this was the best way to prevent contagion.”
A banking source in San Francisco called the developments “good for depositors, but it is more regulation — and it moves us closer to nationalizing banking.”
Meanwhile, Signature bank executives are calling wealthy clients, begging them to stay, and telling them “your money is safe here,” a source told The Post.
“I was ready to pull everything, now I’m reconsidering. There’s no promise anywhere else is safer,” the source said. “I’m still going to be pulling some money… we shouldn’t have to even have that conversation.”
The government’s extraordinary action came hours after Treasury Secretary Janet Yellen publicly said the government wouldn’t bail out Silicon Valley Bank, a favorite of tech startups focused on climate change, as well as California wineries.
Appearing on CBS’ “Face the Nation,” Yellen balked at a government rescue of the nation’s 16th-largest bank, as was done for hundreds of institutions in 2008 over the subprime mortgage meltdown.
“During the financial crisis, there were investors and owners of systemic large banks that were bailed out,” Yellen said. “And the reforms that have been put in place means that we’re not going to do that again.”
Continued at link