Several banks have come together to save First Republic Bank. Currently, there is an atmosphere of uncertainty in the face of the country’s banking crisis. Who is in charge of resolving bankruptcies? In Globe Live Media we tell you

The financial collapse of Silicon Valley Bank and then Signature Bank has set off economic alerts in the United States. Billions of dollars are involved in its bankruptcy and now there is uncertainty about what could come.

Faced with the critical situation, several U.S. banks, including JPMorgan Chase, Citigroup, Wells Fargo and Goldman Sachs, have joined together to create a $30 billion rescue fund to support San Francisco-based First Republic Bank.

Other banks that have joined the First Republic Bank bailout include Truist, Morgan Stanley, BNY Mellon, State Street, US Bank, PNC and Bank of America. First Republic Bank has now been hit by investors following the crisis unleashed by the collapse of Silicon Valley Bank and Signature Bank, and as time goes by, its chances of going bankrupt are increasing.

They are not the only banks that are raising alarm bells. Just this week, the Swiss bank Credit Suisse lost its value, although it later recovered.

In the face of such a series of events, we can wonder who would be taking care of the money involved in these failures. And this is something that is not entirely clear. So far, the administration, led by President Joe Biden, has said it would guarantee deposits of more than $25,000 that are not insured by law for both Silicon Valley Bank and Signature Bank customers.

Banks borrow to pay off those who want to withdraw their money

The U.S. Federal Reserve announced a new lending program for all banks that need to borrow money to pay for the massive withdrawals their customers are making.

So far, according to the Fed, it is known that several U.S. banking institutions have requested some $300 billion dollars in emergency funds.

The direct cost to taxpayers in these cases is non-existent, at least so far, as President Joe Biden has insisted that American money will not be used to solve this financial crisis.

The same cannot be said for other financial institutions, who have to come together, as they are doing to save First Republic Bank from failure, to raise the money required to cover the uninsured deposits of the failing banks. And then the cost could be passed on, as if in a chain, to those who have taken out some of their products.

Treasury Secretary Janet Yellen has tried to calm things down by saying that the U.S. banking system “remains sound” and that citizens “can feel safe” about their savings and deposits.

“I can assure members of the committee (U.S. Congress) that our banking system remains sound and that Americans can be confident that their deposits will be there when they need them,” Yellen said.

“It is important to note that no taxpayer money is being used or put at risk with this measure. Deposit protection is provided by the deposit guarantee fund, which is funded by the fees it charges banks,” she said.

Silicon Valley Bank officially declared bankrupt

Following its collapse last week, SVB Financial Group, the parent company of Silicon Valley Bank, officially filed for bankruptcy this Friday, March 17, 2023, it was announced via a press release.

“SVB Financial Group (“the Company”) (NASDAQ: SIVB ) announced today that it has filed a voluntary petition for a court-supervised Chapter 11 reorganization in the United States Bankruptcy Court of the States for the Southern District of New York to preserve value.

The SVB Securities and SVB Capital funds and general partner entities are not included in the Chapter 11 filing and continue to operate in the normal course as SVB Financial Group continues its previously announced exploration of strategic alternatives for these valuable businesses,” reads the press release.

According to the release, the company believes it has approximately $2.2 billion of liquidity. In addition to cash and its holdings in SVB Capital and SVB Securities, SVB Financial Group has other valuable investment securities accounts and other assets for which it is also exploring strategic alternatives.

“SVB Financial Group’s funded debt is approximately $3.3 billion in aggregate principal amount of unsecured notes, which are solely a resource for SVB Financial Group and have no claim against SVB Capital or SVB Securities. SVB Financial Group also has $3.7 billion of preferred equity outstanding,” it read.

Categorized in: