Silicon Valley Bank bankruptcy: the FED and the US government take action

Silicon Valley Bank on a drip – As the weekend drew to a close, we learned yesterday that US authorities would be preparing concrete action to curb the risks of contagion in the face of the fall of the Silicon Valley Bank. Indeed, you are not unaware that the bank of start-ups has been going through since the end of last week an unprecedented liquidity crisis. Watched like milk on fire, from the government of Joe Biden Passing by Janet Yellen but also the FDIC : all observe the agony of the SVB and plan to take action.

Joe Biden’s government at the bedside of Silicon Valley Bank

It was Reuters initially who explain in an article that american government would work on consequences of the Silicon Valley Bank bankruptcy. Anonymous sources – who would be officials of Joe Biden’s government – would then have paid particular attention to the start-ups and regional banks taken away in the storm.

In this sense, the American government would have decided toconsider a battle plan to avoid a potential financial crisis.

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Janet Yellen and the American Treasury: avoiding a financial crisis at all costs

Furthermore, our colleagues of the Washington Post explain, also helped by anonymous sources, that the famous US Secretary of the Treasury, Janet Yellen, staunch enemy of bitcoin, too, would work with regulators to deal with the bank’s collapse. Janet Yellen also specifies that her services and regulation are:

“Very aware of the problems depositors will have, many of them are small businesses that employ people across the country. And of course that’s a significant concern, and we’re working with regulators to try to address those concerns. »

Thus, the regulator is considering exceptional measures if the bank does not find a buyer in order to avoid at all costs a panic on the markets and a banking crisis comparable to the subprime crisis of 2008.

FED will reimburse SVB users

Faced with all these recommendations, the FED has confirmed put everything in place to reimburse users of Silicon Valley Bank:

“Today, we are taking decisive action to protect the US economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to play its vital role of protecting deposits and providing access to credit to households and businesses in a way that supports strong and sustainable economic growth. (…) After receiving a recommendation from the FDIC and Federal Reserve Boards, and consulting with the President, Secretary Yellen approved actions allowing the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, Calif. , in a way that fully protects all depositors . Depositors will have access to all of their money from Monday, March 13. Any loss associated with the Silicon Valley Bank resolution will not be borne by the taxpayer.”

The FED also explains that these measures will be the same for the Signature Bank, a crypto-friendly bank also swept away in the storm and creates a $25 billion fund for banks in distress.

The downfall of crypto domino for Silicon Valley Bank

It would therefore be a matter for the Treasury to allow protection for all investors, even for those who do not benefit from the protection of the FDIC (Federal Deposit Insurance Corporation). As a reminder, the FDIC is a independent government agency the United States. Its responsibility is to guarantee bank deposits. In fact, she is guarantor of popular confidence in the US financial system. In its operation, the FDIC insures bank loans up to a certain amount. However, if systemic risk in the market is too great, it may decide to protect uninsured deposits, especially those of small investors below $250,000.

This wobbly situation filled with suspense affects traditional finance and is already creating damage within our ecosystem. Circle possessing $3.3 billion at the SVB,‘USDC experienced a de-inking this weekend which, in the words of Circle, should return to normal at the reopening of banks on Monday.

The coming days promise to be crucial both for Silicon Valley Bank, but also for investors. For their part, the FED, Congress, the FDIC, all are waiting, like us, for this start of the week, keeping in mind the still fresh bankruptcy of Silvergatethe bank for crypto companies.

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