SANTA CLARA, Calif. (KRON) — Silicon Valley Bank will not be protected by a federal bailout after its failure, but depositors will have access to all of their funds as soon as Monday, according to the U.S. Department of Treasury.
“The purpose of most people who bank here is to run companies and the majority of their funds go into salaries,” Ben Sand, a Silicon Valley Bank customer, told KRON4. “The people who bank here hope to be millionaires and billionaires one day but right now they are running companies and taking care of investors assets. They’re hiring staff. They are paying staff. They are paying rent. That’s the money that this bank holds is primarily responsible for.”
Sand added that the concern for many customers is whether they will see their money if they cannot get it right away.
“There is the assurance from the FDIC that we will but given the reason this bank had the trouble that it did, there could be more to come from here,” Sand said.
Department of Treasury Secretary Janet Yellen, in an interview with CBS’ “Face the Nation,” provided few details on the government’s next steps. But she emphasized that the situation was much different from the financial crisis almost 15 years ago, which led to bank bailouts to protect the industry.
“We’re not going to do that again,” she said. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”
With Wall Street rattled, Yellen tried to reassure Americans that there will be no domino effect after the collapse of Silicon Valley Bank.
“The American banking system is really safe and well capitalized,” she said. “It’s resilient.”
Customers of SVB had some federal protections for their funds. The first $250,000 deposited in the accounts is insured by the Federal Deposit Insurance Corporation. Originally, only those funds were guaranteed to depositors on Monday morning.
However, Dept. of Treasury has confirmed that all of the deposits formally held by SVB will be accessible on Monday, according to a report from NBC News. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” the Department told NBC.
The Department also announced that the senior management of SVB would be removed. It was not clarified if lower-level staff would now be guaranteed roles.
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For the many depositors who had more than $250,000 in their accounts — including individuals and even many Silicon Valley startups — this update is likely bringing a significant sigh of relief.
After the FDIC seized the assets of SVB, it formed the Deposit Insurance National Bank of Santa Clara and placed all funds into the bank at market close on Friday. The FDIC originally planned to provide a certificate to depositors listing the amount of uninsured funds that were held by SVB.
As the assets of SVB were sold off, the resulting funds were planned to be disbursed to depositors in an aim to recoup deposit amounts. Now, the Dept. of Treasury says it will back all deposits at the bank regardless of the outcome of SVB’s asset sales.
A petition signed by over 5,000 CEOs was posted to the Y Combinator website on Saturday. The list of signees includes CEOs and founders from companies like Dropbox, ShipBob and Rocketplace. The petitioners attached a letter directed at Secretary Yellen, asking for her office to support efforts to make depositors whole.
“Silicon Valley Bank’s failure has a real risk of systemic contagion. Its collapse has already instilled fear among founders and management teams to look for safer havens for their remaining cash, which can trigger a bank run on every other smaller bank.
If we allow this to happen, it will immediately impact the US technology industry and US competitiveness worldwide and ultimately set back US competitiveness by a decade or more, while the rest of the world races forward.
We have a simple ask: small business depositors at Silicon Valley Bank should be made whole. Regulators need to conduct a backstop of depositors. We are not asking for a bank bailout.” — Garry Tan, CEO & President Y Combinator