TPA Responds to Silicon Valley Bank Collapse

For Immediate Release                                                 Contact: Abigail Graham: (202) 417-7235

March 13, 2023                                                                        

WASHINGTON, D.C. – Today, the Taxpayers Protection Alliance (TPA) called on lawmakers, the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve to refrain from banking bailouts following the implosion of Silicon Valley Bank (SVB). On March 12, the federal government announced that it would be guaranteeing all deposits at SVB, despite more than 90 percent of the bank’s accounts exceeding the $250,000 limit for FDIC protection. Federal regulators also extended blanket deposit protections to the beleaguered Signature Bank of New York, while the Federal Reserve announced generous lending provisions for banks on the cusp of insolvency.

TPA President David Williams called for restraint, noting:

“Hundreds of millions of households are already buckling under the weight of a $31 trillion debt and six percent inflation. The federal government opening the door to widespread bank bailouts and increased deposit insurance limits allows wealthy investors to ‘borrow’ money from struggling taxpayers and consumers on overly generous terms. Seismic shifts in FDIC policy also make it more likely that the agency will raise deposit insurance premiums that disproportionately harm smaller banks. These fees will invariably be passed along to consumers in the form of higher financial services fees. Smaller institutions and their consumers are already reeling from the high regulatory costs imposed by the 2010 Dodd-Frank Act. Now is not the time to impose an even greater financial burden.”

“It’s understandable that regulators might try to wind down banking operations for lenders that are clearly in over their heads. If these institutions’ assets are sufficient to support the withdrawal claims of depositors, consumers should have every means at their disposal to get back the funds that they put in. The danger is the federal government stepping beyond these bounds and subsidizing reckless business practices, setting the stage for the next economic calamity. Taxpayers remember all too well the $700 billion bailout green-lit by Congress in 2008 to tide over big banks which unwisely gambled on mortgage-backed securities. Washington, D.C. must learn its lesson and avoid its previous mistakes.”

“Congress should consider reforms that would strengthen the banking sector and make the SVBs of the world less prone to runs by depositors. This could include encouraging a vibrant marketplace for competing deposit insurance plans rather than a one-size-fits-all FDIC system. Further, the government should reform acquisition and capitalization rules to make it easier for banks to minimize fallouts from losses. Bailouts and more red ink are not the answer.”

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Taxpayers Protection Alliance (TPA) is a non-profit, non-partisan organization dedicated to educating the public through the research, analysis and dissemination of information on the government’s effects on the economy.