Progressives used the moment to call for tighter regulations, including Senator Elizabeth Warren, Democrat of Massachusetts, in a Times Opinion guest essay:
These bank failures were entirely avoidable if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018. S.V.B. and Signature are gone, and now Washington must act quickly to prevent the next crisis.
What we know (and don’t know) about the bailout
The government’s deal to backstop depositors’ money held at all banks — and, in particular, at Silicon Valley Bank and Signature Bank — came as a huge relief to start-ups, the venture capital ecosystem and investors. But it hardly removes the contagion fears. Here are the main points of the rescue program, and the questions we still have.
The move could improve the prospects of a deal for S.V.B. A potential buyer wouldn’t have to absorb the bank’s huge losses, making the bank, which has a powerful customer base of tech elites and start-ups, more desirable. But will a savior demand some kind of protection against possible future litigation?
Silicon Valley shareholders will see their holdings wiped out. That’s a key difference from the Troubled Asset Relief Program, the sweeping banking bailout that saved U.S. lenders during the 2008 financial crisis.
Other banks have a new liquidity cushion. The Fed’s new program will let eligible banks can borrow against bond holdings that have lost value since the central bank jacked up interest rates. That’s a big deal for banks sitting on huge quantities of these bonds, like Charles Schwab and First Republic, that would have had to take losses too if a wave of customer deposit withdrawals forced them to sell off those holdings. (Banks wouldn’t book a loss if those bonds are held to maturity.)
Are taxpayers really off the hook? Federal regulators say that banks insured by the F.D.I.C. (that is, most U.S. lenders) will be required to pay a tax to fund the measure.
But there’s nothing stopping banks from passing on that cost to customers, including through, say, credit card fees. And the loan program itself is backed by $25 billion from the Exchange Stabilization Fund, a Treasury Deposit emergency rescue fund financed by taxpayers.
