US might face a banking crisis if SVB isn't bailed: Axios

By Al Mayadeen English
Source: Axios
12 Mar 2023 19:35
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Corporate deposits amounting to "hundreds of billions of dollars" may be shifted from regional banks to the so-called systemically significant banks if SVB's customers do not have access to their deposits.

A property managment representative gestures while asking reporters to clear the entrance area to Silicon Valley Bank in Santa Clara, Calif., Friday, March 10, 2023 (AP Photo/Jeff Chiu)

According to a report published by Axios, the administration of US President Joe Biden may experience a financial crisis unless the government immediately announces a strategy to safeguard Silicon Valley Bank (SVB) depositors.

If a rescue plan is not implemented before SVB banks reopen on Monday, Biden may be in danger of a "catastrophic" financial disaster, according to the news website.

Corporate deposits amounting to "hundreds of billions of dollars" may be shifted from regional banks to the so-called systemically significant banks if SVB's customers do not have access to their deposits by Monday morning, according to Axios.

California's Department of Financial Protection and Innovation (CDFPI) and Federal Deposit Insurance Corp (FDIC) announced on Friday the seizing of SVB's assets - worth nearly $175 billion - and relocating them to a newly established institution, the Deposit Insurance Bank of Santa Clara.

The new body will be responsible for making payments to clients with insured deposits on Monday, while the remaining assets will be auctioned to pay other depositors.

On Friday, Silicon Valley Bank (SVB), America's 16th-largest bank, collapsed marking the second-largest bank failure in US history, which prompted regulators to seize its assets and halt trade on its stocks in Nasdaq.

Despite scrambling to allocate funds or find a buyer, the bank's failure to do so has led to the value of its shares crashing.

SVB, which is one of the main lenders and a partner to technology and healthcare startups that went public in 2022 - including well-known firms - has sent the early-stage tech companies and the banking sector in a spiral.

Earlier today, American billionaire and Twitter owner, Elon Musk said he does not rule out the possibility of buying collapsed US Silicon Valley Bank.