WASHINGTON — Plans announced Sunday to fully reimburse deposits made in the collapsed Silicon Valley Bank and the shuttered Signature Bank will rely on Wall Street and large financial institutions — not taxpayers — to foot the bill, Treasury officials said.
“For the banks that were put into receivership, the FDIC will use funds from the Deposit Insurance Fund to ensure that all of its depositors are made whole,” said a senior Treasury Department official, who spoke to reporters Sunday about the plan on the condition of anonymity.
“The Deposit Insurance Fund is bearing the risk,” the official emphasized. “This is not funds from the taxpayer.”
The Deposit Insurance Fund is part of the FDIC and funded by quarterly fees assessed on FDIC-insured financial institutions, as well as interest on funds invested in government bonds.
The DIF currently has over $100 billion in it, a sum the Treasury official said was “more than fully sufficient” to cover SVB and Signature depositors.
The Biden administration is deeply aware of the public anger sparked by taxpayer-funded bailouts of major Wall Street banks during the 2008 financial crisis, and using the DIF to shore up depositors is seen as a way to avoid repeating the same process.
To that end, federal officials strongly pushed back on the idea that the plans for SVB and Signature constituted a “bailout.”
“The banks’ equity and bond holders are being wiped out,” said the official at Treasury. “They took a risk as owners of the securities, they will take the losses.”
“The firms are not being bailed out … depositors are being protected.”
Already Sunday night, there were early signs that Biden’s plan to use the DIF to help SVB and Signature depositors was meeting the demands of at least one critic of the 2008 bailouts.
Sen. Bernie Sanders, I-Vt., insisted that “If there is a bailout of Silicon Valley Bank, it must be 100 percent financed by Wall Street and large financial institutions.”
Sanders blamed SVB’s collapse on successful…
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