Breaking news: Federal authorities are seriously considering safeguarding all uninsured deposits at Silicon Valley Bank, according to three people with knowledge of the matter, who spoke on the condition of anonymity to describe private deliberations.
Officials at the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation discussed the idea this weekend, the people said, with only hours to go before financial markets opened in Asia. White House officials have also studied the idea, per two separate people familiar with those discussionsThe plan would be among the potential policy responses if the government is unable to find a buyer for the failed bank.
Officials have grown increasingly alarmed by the prospect that SVB’s collapse could lead depositors to move their money out of similarly situated banks and into the safer Wall Street firms. The U.S. banking system is highly concentrated, with the top five institutions holding almost $13 trillion in assets. Even if other banks that are comparable in size to SVB suffered depositor runs, the overall financial system would continue to function, he said.Bob Hockett, a Cornell University professor who worked at the central bank, said the FDIC has the legal means under the “systemic risk exception” of the Federal Deposit Insurance Corporation Improvement Act to intervene.
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