How a Former FDIC Chairman is Reacting to the Silicon Bank Valley Failure, A Discussion with Special Guest Bill Isaac, Chairman, Secura/Isaac Group, and FDIC Chairman from 1981-1985
After reviewing the circumstances leading to the failure of SVB and historic parallels, we discuss the merits of the regulators\u2019 decision to invoke the Systemic Risk Exception and protect all SVB deposit accounts, notwithstanding the $250,000 FDIC insurance limitation, alternate approaches that regulators might have considered for protecting uninsured funds, and the Fed\u2019s creation of the Bank Term Funding Program to make available additional funding to eligible depository institutions. We also discuss the impact of the mark-to-market accounting standard on bank liquidity and the role of the Fed\u2019s monetary and regulatory policies in SVB\u2019s failure. Finally, we discuss how the regulators could stop further runs on banks by temporarily covering all deposits, regardless of amount, or guaranteeing the full amount of demand noninterest-bearing transaction deposits and certain other accounts as the FDIC did during the recession of 2008-09.
Alan Kaplinsky, Senior Counsel in Ballard Spahr\u2019s Consumer Financial Services Group, leads the discussion, joined by Scott Coleman, a partner in the firm and member of the firm\u2019s Banking and Financial Services team and the Distressed Financial Institutions and Counterparties component of the firm\u2019s Distressed Assets and Opportunities Initiative.