‘It Is a Bailout’: Former FDIC Chair Says of Special Treatment of Silicon Valley, Signature Bank

A worker (C) tells people that the Silicon Valley Bank (SVB) headquarters is closed in Santa Clara, Calif., on Mar. 10, 2023. (Justin Sullivan/Getty Images)

Former Federal Deposit Insurance Corporation (FDIC) chair Sheila Bair has said that Silicon Valley Bank (SVB) received a “bailout” out from the federal government following its collapse last week.

Bair made the comments during an appearance on FOX Business Network’s “The Claman Countdown” on Mar. 13, shortly after the Federal Reserve, the Treasury Department, and the FDIC announced additional funding to ensure all deposits at SVB, both insured and uninsured, are returned in full.

Bair, who played a prominent role in the government’s response to the financial crisis of 2008–09, was asked if the decision amounted to a “bailout.”

“Well, it is a bailout—different people define ‘bailouts’ in different ways,” Bair said. “We have a set of rules, we give a lot of support to banks; deposit insurance is one of the things we let banks have—they pay a premium for it, it’s capped at $250,000. If we change those rules for a couple of banks and then give them more coverage than anybody else gets, or they were entitled to under the law, I think that’s a bailout.”

The FDIC is an independent government agency that oversees the banking industry and works to ensure stability and confidence in the U.S. financial system.

Typically, the agency covers a deposit insurance amount of $250,000, per depositor, at insured financial institutions, while amounts over that threshold are considered uninsured.

‘All Depositors’ Will Be ’Made Whole’

Depositors with amounts beyond the threshold, therefore, are generally left in a state of limbo and looking at what could potentially be a serious loss.

However, the FDIC, Treasury Department, and the Federal Reserve said on Sunday that “all depositors”—even those with accounts above the threshold—at Silicon Valley Bank, as well as Signature Bank, will be “made whole.”

According to the announcement, depositors will have access to “all of their money” starting Mar. 13.

Officials stressed that no losses associated with the resolution of the two financial institutions will be borne by the taxpayer, adding that the decision was made in order to “protect the U.S. economy by strengthening public confidence in our banking system.”

While speaking to Fox, Bair said that regional banks appear to be stable, but called on regulators to provide greater clarity about why they provided systemic risk exceptions for uninsured deposits at both of the failed banks.

“The problem with these systemic risk exceptions is that they kind of suggest that there’s something bigger and broader going on,” Blair said. “Silicon Valley Bank in particular—that was an unusual situation.”

Biden Administration Says Government Bailout Planned

“I don’t think anybody thinks that community banks are going to get a systemic risk exception to protect their uninsured deposit. So, there are a lot of issues of fairness and equity around this, and I sympathize with the regulators. They had to make some fast decisions, but, boy, I think we need some better communication and clarity about why these two institutions were systemic, and if there’s a broader problem, why aren’t you taking broader steps,” she added.

Bair’s comments come shortly after Treasury Secretary Janet Yellen said that the government would not bail out SVB, as it did with other financial institutions during the previous financial crisis, but noted that regulators are working to ensure people and businesses with money in the failed bank would not be impacted by its collapse.

“During the financial crisis, there were investors and owners of systemic large banks that were bailed out,” Yellen told CBS’s “Face the Nation” on Sunday. “And the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.”

Elsewhere, President Joe Biden said in a statement on Sunday that he is “firmly committed to holding those responsible for this mess fully accountable,” while vowing to continue efforts to bolster oversight and regulation of larger banks so that a similar situation does not arise in the future.

SVB had $209 billion in assets and about $175.4 billion in total deposits as of Dec. 31, 2022, according to the FDIC, while Signature Bank reported $110.36 billion in assets as of Dec. 31, 2022.