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The Biden administration has announced that customers of Silicon Valley Bank will have full access to their deposits, an extraordinary move by federal officials to backstop billions of dollars in uninsured money amid fears that the bank’s collapse could lead to greater panic.
Federal regulators said in a statement issued Sunday that it was taking the emergency measures to prevent contagion at other small and regional banks in the wake of Silicon Valley Bank’s sudden implosion.
In a statement released from Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Federal Deposit Insurance Corp. Chair Martin Gruenberg, the officials said customers of Silicon Valley Bank will be able to access all of their money starting Monday.
Until the announcement, there was widespread fear among depositors of Silicon Valley Bank, since federal insurance covers only up to $250,000 and more than 90% of the bank’s deposits were above that cap.
Although the federal government stepping in to backstop uninsured deposits has been criticized as a bailout, officials Sunday said “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
The Federal Reserve also announced on Sunday that it is taking new steps to make funding available to banks to cushion any potential risk prompted by the Friday collapse of Silicon Valley Bank.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” officials said on Sunday.
As federal officials scrambled to try to prevent a larger financial fallout from the bank’s demise, prominent venture capitalists took to Twitter over the weekend with doomsday predictions, claiming the failure to back up deposits could lead to catastrophe to the tech startups and the world of venture capital.
More than 5,000 startup CEOs and founders pleaded with federal officials for support to back up deposits.
“We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy,” the founders and CEOs wrote in their petition. ” Silicon Valley Bank’s failure has a real risk of systemic contagion.”