How the Federal Reserve’s rescue package for US banks differs from 2008 bailouts

The Federal Reserve and state regulators in California and New York took control of Silicon Valley Bank and Signature Bank to guarantee all deposits and prevent contagion throughout the US banking sector. The extended deposit guarantee is aimed at preventing more bank runs.

March 13, 2023 . 4:37 PM

1 min read

Within three days, the Federal Deposit Insurance Corporation and state regulators in California and New York took control of Silicon Valley Bank and Signature Bank and guaranteed all their deposits, beyond the usual $250,000 federal insurance limit.
The Federal Reserve also announced a new lending facility, backstopped by the US Treasury department, that other banks can draw on to help them meet demands from depositors.
The moves are intended to prevent contagion throughout the US banking sector after the now defunct Santa Clara-based SVB, whose clients were mostly venture capital funds and tech start-ups, suffered mass deposit withdrawals last week.
The extended deposit guarantee is aimed at preventing more bank runs, by convincing customers to stay put because they will be protected even if another bank fails.
The Fed’s offer to lend against high-quality bonds at par is aimed at helping other banks to meet withdrawals without selling securities at a loss.