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Fed to hold meeting on Monday in wake of SVB's swift collapse, seeks to avoid widespread panic

Published Mar 12, 2023 11:51AM ET
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© Reuters Fed to hold emergency meeting on Monday amid SVB's swift collapse
 
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By Investing.com Staff

The Federal Reserve Board of Governors, which includes Fed Chairman Jay Powell, will be holding a regularly scheduled closed-door meeting under expedited procedures at 11:30 ET (16:30 GMT) on March 13, 2023. While the meeting was scheduled to discuss the advance and discount rates to be charged by the Federal Reserve Banks, top of mind among the Governors will be the sudden collapse and FDIC seizure of SVB Financial Group (NASDAQ:SIVB) on Friday. In fact, the Fed is already said to be discussing ways to avoid panic, especially among uninsured depositors at other institutions.

Bloomberg reported on Saturday that bank regulators, including the Fed, are discussing a new special vehicle that will be designed to reassure uninsured depositors and avoid a panic at other banks.

The FDIC insures depositors up to $250,000, but many businesses that banked with SVB had millions in deposits that are now in limbo. In fact, 89% of the bank's $175 billion in deposits were uninsured at the end of 2022.

The FDIC said on Friday it will pay uninsured depositors an advance dividend within the next week. For any remaining uninsured funds, depositors will receive a receivership certificate. As the FDIC sells the assets of SVB, future dividend payments may be made to certificate holders.

Hedge funds are already smelling blood in the water and are offering 60 cents on the dollar to SVB certificate holders, according to a report from Semafor.

The Fed and other regulators are now concerned that actions by uninsured depositors at other banks can cause a similar run.

Sheila Bair, the former head of the FDIC during the global financial crisis, told Reuters that “these banks that have large amounts of institutional uninsured money...that’s going to be hot money that runs if there’s a sign of trouble."

SVB was the largest bank failure since the 2008 financial crisis. It was the 16th largest bank in the U.S. at the end of 2022. Trouble started last week when the company announced on Wednesday evening that it was seeking to raise $2.25B after selling substantially of its available-for-sale securities portfolio at a loss of $1.8B. The disclosure of the trouble had depositors running for the exits. Depositors reacted by initiating withdrawals of $42B in deposits on March 9, 2023, causing a run on the bank. As of the close of business on March 9, the bank had a negative cash balance of about $1B. Amid the bank run, the company was not able to complete the share sale which led to regulators seizing the bank on Friday, March 10, 2023.

Fed to hold meeting on Monday in wake of SVB's swift collapse, seeks to avoid widespread panic
 

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Comments (34)
Sean Stevens
Sean Stevens Mar 13, 2023 2:38AM ET
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SVB is a private financial institution. There should be no government involvement. This administration is out of control.
Tom Troung
Tom Troung Mar 12, 2023 11:50AM ET
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Biden even called California governor. if this is an isolated problem due to svb own fault, nobody would care
Jose Lopez
Jose Lopez Mar 12, 2023 10:48AM ET
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Thet create this mess
DuVaughn Smith
DuVaughn Smith Mar 12, 2023 9:51AM ET
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Sounds like a pause on rate hikes.
Robert Cox
Robert Cox Mar 12, 2023 9:51AM ET
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Just before a sector collapse.
Mar 12, 2023 5:46AM ET
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Taxpayers pay in two ways: yet another bailout of banks and emergency rate cuts > moar inflation. Everyone becomes a Communist when it suits their need
John Lakran
John Lakran Mar 12, 2023 5:46AM ET
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Nobody wants to be a communist but I do expect the very people who failed us to fix the mess they created. I didnt vote these people in but this is what we get when they put those with only academia credentials in positions they dont belong. We need experienced business people not those with just degrees.
Mar 12, 2023 5:45AM ET
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Zero interest rates and QE infinity. Prepare for a dollar collapse
Brad Albright
Brad Albright Mar 12, 2023 5:45AM ET
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How would you recommend we prepare? I am thinking of digging a big hole to crawl into, but I wonder if you have any other practical advise.
Dave Jones
Dave Jones Mar 12, 2023 3:26AM ET
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Oh here we go...HYPERINFLATION!
William Smith
William Smith Mar 11, 2023 11:56PM ET
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Guess they don't work weekends.
Steve Jones
Steve Jones Mar 11, 2023 10:42PM ET
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The fed already had a meeting scheduled for Monday
Andre Goldman
Andre Goldman Mar 11, 2023 8:35PM ET
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What a scam: the article was written by: StreetInsider.com Staff -- 'Staff" LOL...They don't even have a name. That's just too much. What a 100% scam to pump the market.
Andre Goldman
Andre Goldman Mar 11, 2023 8:35PM ET
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This article will confuse the bulls, they will probably think to buy the market, and then the short sellers will short the market at a higher level and make much more profits taking all bulls' money. What a scam.
Fred Afzal
Fred Afzal Mar 11, 2023 8:35PM ET
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The market is going to tumble on Tuesday when the CPI report comes out. this is just a scam for people to pump up the market which what happens Monday afternoon before close it will be a dump run!
Andre Goldman
Andre Goldman Mar 11, 2023 8:35PM ET
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Fred Afzal   Fred, you are correct. I believe Fred that it's what's happening here. The famous pump and dump story. -- One good article will always have the authors name. What a scam.
 
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