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  • 1440 Daily Digest

Bank Run Fallout

US federal regulators announced emergency measures yesterday to protect depositors following the collapse of Silicon Valley Bank last week. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and Federal Deposit Insurance Corp. Chair Martin Gruenberg stated depositors will have access to all money today and taxpayers will not be responsible.

In addition, the Fed will provide supplemental funding to banks through a new Bank Term Funding Program, which will provide loans of up to one year. Shareholders and some unsecured creditors won't be protected by the program. The regulators also announced that depositors at Signature Bank, which closed Sunday, will have access to their deposits.

California-based SVB was shut down Friday by the FDIC following an announcement last week it had sold roughly $21B in securities at a $1.8B loss, and was seeking to raise $2.25B in capital. Depositors began withdrawing their money on fears of the bank's solvency, also known as a bank run (see 101).

Separately, SVB CEO Greg Becker sold $3.6M of company stock under a trading plan less than two weeks before the bank disclosed the losses.

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