March 13, 2023 (MLN): The US banking system has experienced a series of crises lately, resulting in the collapse of three banks and authorities taking extraordinary measures to reassure depositors.
The troubles began with the liquidation of the small regional bank, Silvergate Bank, a popular choice among cryptocurrency users, which had been hit by several crypto mishaps and sudden withdrawals.
Later that same night, Silicon Valley Bank, the country's 16th largest bank by assets, announced it was facing a massive run of unexpected withdrawals due to the tech sector slowdown and the effects of the Federal Reserve's policy U-turn.
The bank posted a negative cash position of nearly $1 billion and saw an estimated $42bn of withdrawal orders on Thursday alone.
The FDIC took over the bank and said it would protect insured deposits, but the guarantee only covered about four percent of the bank's deposits. Other mid-sized and regional institutions have also been pressured by worries of a similar run on deposits.
To avert a potential financial panic, officials from the Fed, FDIC, and Treasury announced that SVB depositors would have access to "all of their money" starting Monday, March 13, and that American taxpayers will not have to foot the bill.
The Fed also announced it would make extra funding available to banks to help them meet the needs of depositors. President Joe Biden praised regulators' "immediate action" and reassured the public that their deposits are safe.
