Wall Street — not taxpayers — will pay for the SVB and Signature deposit relief plans (2024)

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Wall Street — not taxpayers — will pay for the SVB and Signature deposit relief plans? ›

Wall Street — not taxpayers — will pay for the SVB and Signature deposit relief plans. The money to fully reimburse depositors of the collapsed Silicon Valley Bank and the shuttered Signature Bank

Most of the cost will likely be covered by proceeds the Federal Deposit Insurance Corp. receives from winding down the two banks. Any costs beyond that would be paid for out of the FDIC's deposit insurance fund.

FDIC insurance means that any money you have in an SVB bank account up to $250,000 will be fully covered. You will get all that money back. For anything over $250,000 in your SVB bank account, Moody's estimates you will get 80 cents to 90 cents for each dollar deposited.

The U.S. government took extraordinary steps Sunday to stop a potential banking crisis after the historic failure of Silicon Valley Bank, assuring those who had made deposits at the failed financial institution that they would be able to access all of their money quickly, even as another major bank was shut down.

Silicon Valley Bank is closed, so the FDIC formed the Deposit Insurance National Bank of Santa Clara to consolidate insured and uninsured deposited into one institution. All deposits of SVB were transferred to the National Bank of Santa Clara, and insured depositors had access to their funds on March 13.

America's biggest banks each took a 10-figure hit to their earnings last quarter to cover the cost of bailing out uninsured depositors at Silicon Valley Bank and Signature Bank. Why it matters: Most of the banks took the FDIC's special assessment in stride — their earnings are strong enough to be able to afford it.

Federal Deposit Insurance Corporation (FDIC)

“Depositors will have access to all of their money starting Monday, March 13,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

The FDIC will commence a liquidation process of assets that SVB valued at more than $200 billion — but the actual dollar amount those assets fetch is likely to be less. "Uninsured depositors will get a recovery, and may even get a full recovery, but that will happen at some point in the future," Ricks said.

The Government Steps In. Well, the government did end up stepping in. On Sunday, the Biden administration announced that all of Silicon Valley Bank's customers — whether they were insured or not — will have full access to their deposits.

Can the US government take money out of your bank account? ›

The IRS can take money out of your bank account when you have an unpaid tax bill, but levies aren't automatic. If you owe unpaid tax debts to the federal government, the IRS has to follow the proper procedures in order to take money from your bank account.

After the collapse of SVB and Signature Bank, record levels of deposits poured into Bank of America, JPMorgan Chase and Citibank from mid-size and regional banks.

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors.

The new transaction covers $119 billion in deposits and $72 billion in assets, and "SVB's 17 branches will open as First Citizens" on Monday, the FDIC said. Depositors of SVB will "automatically become depositors of First Citizens Bank and the FDIC will continue to insure deposits, the agency said.

It's under new management, and now owned by North Carolina-based First Citizens Bank, which bought its deposits and branches out of bankruptcy weeks after SVB crumbled in March 2023.

The news: Last Friday, Pennsylvania financial regulators seized and shut down Philadelphia-based Republic First Bank in the first FDIC-insured bank failure of 2024.

The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.

Roku held approximately $487 million of its $1.9 billion in cash at Silicon Valley Bank, which collapsed Friday and was taken over by the Federal Deposit Insurance Corporation, the streaming technology company disclosed in an SEC filing.

The FDIC is funded by FDIC-insured institutions, not taxpayers, and FDIC deposit insurance is backed by the full faith and credit of the United States Government. FDIC deposit insurance coverage depends on the type of banking products you have. Depositors do not need to apply for FDIC insurance.