Dem Rep. Ro Khanna urged the Biden administration after the 2nd largest bank collapse in history occurred this week.
“I have great respect for Secretary Yellen, but I think we need to have more clarity and greater strength in what Treasury is saying. First, the principle needs to be that all depositors will be protected and have full access to their accounts Monday morning,” Khanna said.
Speaking of the Biden administration, Khanna also said “They don’t realize what the problem could be and how fast money is moving and the challenge this could be”
“All depositors, meaning those with accounts bigger than $250,000, which is the cutoff for insurance right now. Yes. All of them, there’s precedent for this. Chair Powell, when he was at Treasury in 1991, the Bank of New England collapsed. And Chair Powell said that Treasury coordinated with FDIC and with the Fed and they insured every depositor then. And why do they do it? They didn’t want a regional run on the banks,” he added.
“Here’s what I’m hearing from people in my constituency. They are getting notes to pull out a regional banks and all of this will be consolidated in the top four banks. We don’t want that as a nation, especially if you’re progressive. The other thing is the payroll companies that are involved. Some of them have 400,000 folks. They’re not going to be able to meet payroll if they don’t have access to deposits,” Khanna said.
Silicon Valley congressman Ro Khanna says “more clarity” needed from Treasury Department on Silicon Valley Bank response, adding that all depositors need to be protected and be made whole. pic.twitter.com/gTDVRTVPZ4
— Face The Nation (@FaceTheNation) March 12, 2023
Democrat Rep. Ro Khanna slams the Biden administration's inaction after the second-largest bank collapse in U.S. history:
"They don't realize what the problem could be and how fast money is moving and the challenge this could be." pic.twitter.com/lTDfsb3v5X
— RNC Research (@RNCResearch) March 12, 2023
Billionaire investor Bill Ackman also chimed in, saying that the Government has only hours remaining until a major financial meltdown:
The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent @jpmorgan @citi or… https://t.co/SqdkFK7Fld
— Bill Ackman (@BillAckman) March 11, 2023
“The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing SVB to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent JP Morgan, CitiBank or Bank Of America acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs),” he said.
“These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits. These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions. The increased demand for short-term UST will drive short rates lower complicating the Federal Reserve’s efforts to raise rates to slow the economy. Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits (in exchange for penny warrants which would have wiped out the substantial majority of its equity value) this could have been avoided and SVB’s 40-year franchise value could have been preserved and transferred to a new owner in exchange for an equity injection. We would have been open to participating. This approach would have minimized the risk of any gov’t losses, and created the potential for substantial profits from the rescue. Instead, I think it is now unlikely any buyer will emerge to acquire the failed bank,” he added.
Stay tuned for the latest on this developing matter….