How Washington came to rescue US banks after the SVB collapse

Frenetic weekend saw US policymakers deciding to protect all of SVB’s deposits, regardless of size

After the sudden collapse of Silicon Valley Bank, California Democratic Rep. Maxine Waters started furiously working the phones to find out what was going on with the failed lender ~ and what would happen to its panicked depositors.

Waters, former chair of the House Financial Services Committee, had her doubts that another bank would step up as a saviour and buy the defunct institution.

“Banks don’t just wake up and say: ‘Oh, there’s a problem with another significant bank and they’ve collapsed. Let’s just take it over,”’ she said.

So began a frenetic weekend of nonstop briefings with regulators, lawmakers, administration officials and President Joe Biden himself about how to handle the demise of the nation’s 16th-biggest bank and a go-to financial institution for tech entrepreneurs. At the core of the problem was tens of billions of dollars ~ including money companies needed to meet payrolls ~ sitting in Silicon Valley Bank accounts that were not protected by federal deposit insurance that only goes up to $250,000.

Something needed to be done, federal officials agreed, before Asian stock markets opened Sunday evening and other banks faced the potential for waves of panicked withdrawals Monday morning.

“We were racing against the clock,” said Bharat Ramamurti, deputy director of the National Economic Council.