Regulators shut Signature Financial institution, second shuttered by feds after SVB catastrophe
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March 12, 2023 | 7:41 p.m
Signature Bank was shut down by its state charter agency on Sunday.
REUTERS
The federal government announced the collapse of a second bank with deep ties to the tech industry on Sunday — as regulators rushed to stem losses caused by last week’s collapse of Silicon Valley Bank.
Manhattan-based Signature Bank — a key financial institution for the cryptocurrency industry — has been shut down due to a “similar systemic risk exemption,” according to a joint statement by heads of the U.S. Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp.
Silicon depositors and signatures will be made complete, but banks’ shareholders and unsecured debtors will not be protected, officials said.
The Federal Reserve said it will create a new Bank Term Funding Program to offer custodians loans with maturities of up to one year backed by US Treasuries and other assets to help banks.
The Feds said the steps they are taking “will ensure the U.S. banking system continues to fulfill its important role in protecting deposits and providing access to credit for households and businesses in a way that supports strong and sustained economic growth.” promotes”.
California-based Silicon Valley had $209 billion in assets at its failure on Friday, while Signature Bank had more than $110 billion.
The bank was a cryptocurrency-friendly financial institution based in New York.REUTERS
Silicon was the second largest bank to collapse in US history, after Washington Mutual in 2008. Signature was the third largest.
President Biden on Sunday commended the Feds for finding a “quick fix” that “ensures taxpayers’ money is not at risk.”
“The American people and American companies can have confidence that their bank deposits will be there when they need them,” Biden said.
But hedge fund Thomas Hayes of Great Hill Capital told The Post: “It took only two days for regional banks to collapse to do the right thing.”
A tech insider added, “Regulators badly screwed up letting it get to this point, but it was the best way to prevent contagion.”
A San Francisco banking source called the developments “good for depositors, but it’s more regulation — and it’s getting us closer to nationalizing banking.”
The government’s extraordinary action comes hours after Treasury Secretary Janet Yellen publicly said the government would not bail out Silicon Valley Bank, a favorite of tech startups focused on climate change, and California wineries.
While appearing on CBS’s Face the Nation, Yellen resisted a state rescue of the 16th state.
“During the financial crisis, there were investors and owners of systemically important big banks that were bailed out,” Yellen said. “And the reforms that have been put in place mean we won’t do that again.”
The signature bank had total assets of approximately $110.36 billion and deposits of $88.59 billion as of December 31, 2022.REUTERS
Yellen also insisted that officials were “concerned about depositors and focused on meeting their needs.”
“I’ve been working with our banking regulators all weekend to develop appropriate guidelines to address this situation,” Yellen said. “I cannot give any further details at this point in time.”
Yellen’s subsequent statement to Fed Chair Jerome Power and FDIC Chair Martin Gruenberg said taxpayers would not have to cover bank losses, an apparent reference to the Bank Term Funding Program.
Customers were widely expected to make a run on Silicon Valley Bank and possibly many others on Monday morning.
Fox Business senior correspondent Charlie Gasparino tweeted Sunday afternoon that “major financial players” had told the White House to “expect significant bank runs and massive market turmoil on Monday unless a solution to the SVB collapse is found.”
“Companies realizing their short-term deposits with banks are at risk due to @FDICgovlimits. They are preparing to pull money out of mid-tier financial institutions, mon, bank executives say,” he wrote.
Earlier, Gasparino, a Post columnist, tweeted that depositors were “told they will receive 30% to 50% of their money on Monday,” citing bankers with knowledge of the situation.
Gasparino added that bank customers “will get most of the rest over time if there is no resolution, i.e. full @FDICgov coverage or a sale.”
Hedge fund billionaire Bill Ackman of Pershing Square Capital Management also raised the specter of a massive economic meltdown in a rambling, 649-word tweet Saturday morning, warning that the government has “approximately 48 hours to rectify a soon-to-be-irreversible mistake.” to fix. ”
“If @jpmorgan@citi or @BankofAmerica doesn’t acquire SVB before Monday’s opening, a prospect I think is unlikely, or if the government doesn’t guarantee all deposits, the huge sucking noise you’re going to hear will make the payout of substantial.” its all uninsured deposits from all but the “systemically important banks” (SIBs),” the activist investor wrote.
“These withdrawals will deprive local, regional and other banks of liquidity and will initiate the destruction of these important institutions.”
During an appearance on Fox & Friends, Gasparino called the collapse of Silicon Valley Bank “a warning sign of how broken the plumbing of our banking system and economy are.
“I mean, let’s rewind the videotape here a little bit. You know, we’ve been printing money from the Federal Reserve for years. Way too much,” he said. “Even when we got out of the pandemic, the Biden administration was spending a lot. You know, you do stuff like that, you mess with the economy like that… you’re going to have some, some things that happen.”
Additional coverage by Jesse O’Neill and Postwires
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