California lawmakers were told on a briefing call Sunday that the Treasury Department and the Federal Deposit Insurance Corp.'s top priority is to engineer a sale after the collapse of Silicon Valley Bank, two people on the call said.
Lawmakers were also informed on the call that the Treasury is working through options for uninsured accounts over the $250,000 threshold, the sources said.
SVB’s funds are in the hands of the FDIC. All who banked with SVB, one of the leading lenders to the tech sector, had only up to $250,000 guaranteed by the federal government. The financial futures of those who banked more than that amount with SVB remains uncertain.
House Speaker Kevin McCarthy, R-Calif., said Sunday that he’s “hopeful” federal officials will make an announcement about the collapse of SVB before the market opens.
McCarthy said on Fox News’ “Sunday Morning Futures" that he has spoken with Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen after regulators shut down SVB.
“They do have the tools to handle the current situation, they do know the seriousness of this, and they are working to try to come forward with some announcement before the markets open,” McCarthy said. “I’m hopeful that something can be announced today to move forward.”
McCarthy added that he thinks it is “very possible” to find a buyer for SVB, which he believes would be the “best outcome to move forward and cool the markets.”
A group of Democratic lawmakers urged federal officials to act swiftly to protect depositors in a letter Sunday to Yellen, Powell, FDIC Chair Martin Gruenberg and the acting comptroller of the currency, Michael Hsu.
Lawmakers who signed the letter, led by Rep. Josh Gottheimer of New Jersey, the top Democrat in the Problem Solvers Caucus, include Reps. Vicente Gonzalez of Texas, David Trone of Maryland, Joyce Beatty of Ohio, Wiley Nickel of North Carolina, Brittany Pettersen of Colorado, Jared Moskowitz of Florida, Haley Stevens of Michigan, Chrissy Houlahan of Pennsylvania and Gregory Meeks of New York.
“To be clear: we do not believe regulators should assist SVB shareholders,” the letter says, referring to discussions about a buyout, which Yellen has already downplayed. “Right now, we are concerned about the depositors at SVB, and at banks across the country, suddenly unnerved by SVB’s catastrophic failure that unfolded in just forty-eight hours, accelerated, in part, by social media and pack mentality withdrawals.”
Yellen said Sunday on CBS’ “Face the Nation” that there wouldn’t be a bailout. She added that the federal government is trying to figure out a way to help depositors.
The letter urges U.S. officials to prioritize finding a buyer for SVB; encourage banks that have relationships with SVB depositors to extend temporary lines of credit to assist with essential costs, like payroll; and offer liquidity through repurchase agreements. It also calls on Congress and federal regulators to rapidly consider increasing the FDIC limit on deposit insurance above the current $250,000.
Members of the California congressional delegation were also briefed about SVB on Saturday night by the FDIC, multiple offices in the House and the Senate told NBC News.
Rep. Katie Porter, D-Calif., said rising interest rates were a factor behind SVB’s shutdown, along with the Covid-19 pandemic and the bank’s management strategy.
“There are real questions about why the bank didn’t anticipate one of the most fundamental financial facts that everybody should know, which is interest rates go up and they go down,” Porter said in an interview on MSNBC’s “The Sunday Show.”
“You can’t bet on them staying low forever,” she added. “They didn’t — they went up, and the bank wasn’t prepared for, and there are some real oversight questions about that.”
Porter tweeted Saturday that she was working on legislation.
“The collapse of Silicon Valley Bank was totally avoidable,” she wrote. “In 2018, Wall Street pushed a deregulation bill that allowed banks like SVB to take reckless risks. It passed, even as I and many others warned of the risks. I am writing legislation to reverse that law, S. 2155.”
Rep. Ro Khanna, D-Calif., said that acquisitions would be “the ideal situation” and that the California delegation made that clear when it spoke to the FDIC on Saturday night.
“That’s what we urged them to work on. They said they’re working on it. But to have that happen, you need FDIC and Treasury involved, because these assets are not liquid, and they may pay off 10 years from now,” Khanna said on CBS News' "Face the Nation." “I don’t think you’re going to get a private seller without the Treasury Department and FDIC being actively engaged in helping liquidity with these treasury bonds."
Staff members of the Senate Banking Committee were briefed in a call Saturday night, and plans are in the works for a briefing for members on the committee this week, congressional aides said.
Hearings looking into the matter are not off the table but haven't been set, the aides said.