The feds’ move to guarantee all deposits at the collapsing Silicon Valley bank was “clearly” a bailout, according to a former head of Federal Deposit Insurance Corp.
William Isaac, who served as FDIC president from 1981 to 1985 during the Reagan administration, wondered if federal regulators had gone too far in their move to support depositors.
“Well, it obviously is [a bailout]Issac said during a Monday appearance on Bloomberg TV. “It’s not a bailout for the shareholders – they’re wiped out and that’s great, and they should be, and directors and directors are losing their jobs. That’s fine, they should be.”
“I can’t criticize them for their decision to bail out all of their depositors, because I did it myself at the FDIC, but I really wonder if there was something we could have done that was less dramatic and less of a bailout,” Isaac added.
Under normal circumstances, the FDIC insures account balances of no more than $250,000.
Both federal regulators and President Biden insist that taxpayers will not incur any additional costs from the measures. SVB shareholders and bondholders will not receive an exemption.
The deposits will be covered by the FDIC’s Deposit Insurance Fund, as well as from the sale of assets from SVB and another closed institution, Signature Bank of New York.
Republican pundits, including GOP presidential nominee Nikki Haley, have blasted Biden for avoiding the word “bailout” — and warned American taxpayers not to foot the bill for intervention at the end of the day.
During her Sunday appearance on CBS, Treasury Secretary Janet Yellen said bluntly that the federal government would not bail out the Silicon Valley bank.
“During the financial crisis, there were investors and owners of large, systemic banks who were bailed out,” Yellen said. “And the reforms that have been put in place mean we will never do that again.”
The collapse of SVB sparked widespread panic this week and sparked fears of a regional bank run. Bank stocks fell in Monday’s trading, only to recover after the federal banks stepped in to guarantee deposits.
“I’m not generally worried about banks. Most banks are healthy and doing things the right way,” Isaac added.
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