Regulators attempt to mitigate effects of banks’ fall

Feds assume control of second financial institution Sunday, says ‘no costs will be borne by the taxpayer’

Federal regulators announced Sunday another bank had been closed, and the government would ensure all depositors of Silicon Valley Bank — which failed Friday — would be paid back in full as Washington rushed to keep fallout from the collapse of the large institution from sweeping through the financial system.

The Federal Reserve, Treasury and Federal Deposit Insurance Corp. announced in a joint statement “depositors will have access to all of their money starting Monday, March 13.” In an attempt to assuage concerns about who would bear the costs, the agencies said that “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

The agencies also said they would make whole depositors at Signature Bank, which the government disclosed was shut down Sunday by New York bank regulators. The state officials said the move came “in light of market events, monitoring market trends and collaborating closely with other state and federal regulators” to protect consumers and the financial system.

President Joe Biden said Sunday evening the actions were taken at his direction, and he would deliver remarks about the banking system Monday morning.

“I am pleased that they reached a prompt solution that protects American workers and small businesses, and keeps our financial system safe,” Biden said in a statement. “The solution also ensures that taxpayer dollars are not put at risk.”

He added: “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”

The collapse of Signature marks the third bank failure within a week. Silvergate, a California-based bank that made loans to cryptocurrency companies, announced Wednesday that it would cease operations and liquidate its assets.

Amid the wreckage, the Fed also announced it would set up an emergency lending program, with approval from the Treasury, to funnel funding to eligible banks and help ensure that they are able to “meet the needs of all their depositors.”

Concern over wide-reaching problems in the banking sector started in earnest after the FDIC took over Silicon Valley Bank on Friday, putting nearly $175 billion in customer deposits under the regulator’s control. The bank’s failure was the largest since the depths of the financial crisis in 2008. While its customers with deposits of up to $250,000 were insured by the FDIC, the bank had a large number of accounts over that limit.

That reality sent tremors through the banking industry over the weekend. Officials and economists worried that people with uninsured accounts at other regional banks might begin to fear for the safety of their own deposits — which could prompt them to pull their money out and move it to bigger banks in a hunt for safety. That, some warned, could turn what might otherwise be a one-off bank failure into a full-blown financial crisis.