Federal regulators announced on Sunday that they would ensure that all depositors of Silicon Valley Bank — which failed Friday — were paid back in full as they rushed to contain fallout from the collapse of the large institution.
The Federal Reserve, Treasury and Federal Deposit Insurance Corporation announced in a joint statement that “depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

By the time anyone reads this, if they don't get to it until tomorrow (Monday), things will probably have changed. But the news as of 6:00 PM-ish ET on 3/12/23 is that the feds are looking to make sure there is no general bank run on Monday morning. Bank runs are herd contagion phenomena, and when the herd panics the only thing that will slow the stampede down is for everyone to be able to go to the teller window and get their money. If they know they can, the panic ends.

So the news now is that the feds are holding an auction to see if a strong bank will buy the failed bank at a price that will allow the uninsured depositors to be able to get their money. The acquiring bank, if one is found, would ideally bid on the assets and inject the ready cash into the new bank that is formed, or however they structure it, ending the problem. If they can't find another bank to do it, the feds will have to pony up the money, which they can get from assessments to the other banks, if they have to.

The issue is that there could be an economy-wide bank panic if people in other banks start worrying that their money may be at risk.

If I were making bets, it would be that a way will be found.

Just checked the news again, a half-hour after the above, and here's where things stand now:


(https://www.nytimes.com/2023/03/12/business/janet-yellen-silicon-valley-bank.html )

However they do it, this is going to end the risk of a bank panic. All it takes is to know you will get your money, and the herd instinct is happy again.

I'm sure there will be much more, soon.

Bob.

That speaks to a lot of political influence. 90% of Silicon Valley are Dems. You bet they can't lose those votes.

On July 28, 2012, Mr. Drahgi gave an important speech at a global investment conference in London. At the time, the euro was in trouble—primarily because of the sovereign debt crisis across the European Union.

During that speech, he told the audience, in English, that the European Central Bank was willing to do "whatever it takes" to save the euro.

In later years, the financial industry and the media have often written about how that moment, the "whatever it takes" speech and the confidence it projected to the world, was a major factor in the euro's subsequent turnaround.

I beg to differ. This is not politics. If the panic had gotten out of control, then next week it would be your bank, or mine, and you, and I, would not know if we would have any money left. This is how they spread. A bank run is a crowd psychology thing, and when a panic starts, it always goes beyond any rational boundaries and banks far away can be drawn in. This was not about the depositors of one bank in one location, and it was not to save their money alone. Things can go down the tubes fast.

I have been through the the credit crisis in 2008, as most of us probably have, when everything almost went boom, and before that in the "savings and loan crisis" during the first George Bush's term (which he handled very well, by the way.) These psychological crises are not rational and are not local, and do not respect anyone's politics. When bank runs start, they have to be stopped suddenly or they spread. Once people see there is no danger, everything suddenly stops and people become rational again.

Some may recall the crisis in the Euro some years ago, when the then-head of the European Central Bank, Mario Drahgi, stopped the crisis in its tracks just by saying that the bank would do "whatever it takes" to stop the slide:


( https://www.investopedia.com/investing/who-mario-draghi/ )

When confidence is lost, everything is at risk. When people think things will be OK, then the crisis is over, almost instantly. It's funny how this it, but human beings are like this. (And I would be too, if I thought my bank was running out of money, and so would anyone.)

When we're not sure what will happen, we get scared. When normality returns, we are fine. So someone has to step in, and do it fast.

Bob.

I beg to differ. This is not politics. If the panic had gotten out of control, then next week it would be your bank, or mine, and you, and I, would not know if we would have any money left. This is how they spread. A bank run is a crowd psychology thing, and when a panic starts, it always goes beyond any rational boundaries and banks far away can be drawn in. This was not about the depositors of one bank in one location, and it was not to save their money alone. Things can go down the tubes fast.

I have been through the the credit crisis in 2008, as most of us probably have, when everything almost went boom, and before that in the "savings and loan crisis" during the first George Bush's term (which he handled very well, by the way.) These psychological crises are not rational and are not local, and do not respect anyone's politics. When bank runs start, they have to be stopped suddenly or they spread. Once people see there is no danger, everything suddenly stops and people become rational again.

Some may recall the crisis in the Euro some years ago, when the then-head of the European Central Bank, Mario Drahgi, stopped the crisis in its tracks just by saying that the bank would do "whatever it takes" to stop the slide:


( https://www.investopedia.com/investing/who-mario-draghi/ )

When confidence is lost, everything is at risk. When people think things will be OK, then the crisis is over, almost instantly. It's funny how this it, but human beings are like this. (And I would be too, if I thought my bank was running out of money, and so would anyone.)

When we're not sure what will happen, we get scared. When normality returns, we are fine. So someone has to step in, and do it fast.

Bob.