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48 Hours Till Payroll, $200,000 to Go: Diary of a Bank Failure
New York TimesDec 23, 2022
The Facts
The Federal Deposit Insurance Corporation (FDIC) on Sunday announced that First Citizens Bank & Trust Co. ("First Citizens") has agreed to purchase the deposits and loans of the failed Silicon Valley Bank (SVB)
First Citizens will buy SVB's Silicon Valley Bridge Bank branch for about $72B, including its National Association's assets for a discounted price of $16.5B. SVB's 17 branches are set to reopen on Monday as new branches of First Citizens.
The Spin
Narrative A
While this acquisition may not seem like one in the traditional sense, it's still a bailout. These banking institutions got in over their heads and collapsed. The customers of those banks are still getting their money from somewhere, which is partly at the expense of taxpayers and partly the finance industry. So while we call it protecting the consumer, it is ultimately a bailout, just disguised by another name.
Narrative B
There are certainly questions to be answered surrounding how this collapse occurred in the first place, but that doesn't mean the government response is unethical. This is not a bailout, as the FDIC ensured a private entity would pay for it. No federal money is being used other than the highly-praised $250K FDIC insurance policy, so talk about taxpayers bailing out big banks should be nipped in the bud.
