California lawmakers were told Sunday that the Treasury Department and the Federal Deposit Insurance Corporation are planning a sale after the collapse of Silicon Valley Bank, two people told NBC News.
Lawmakers were also told during the call that the Treasury Department is working on options for uninsured accounts above the $250,000 limit, the sources said.
SVB’s funds are currently in the hands of the Federal Deposit Insurance Corporation. Everyone who banked with SVB, one of the leading technology lenders, was only guaranteed up to $250,000 by the federal government. The financial futures of those who traded more than this amount with SVB remain uncertain.
House Speaker Kevin McCarthy, R-Calif., said Sunday that he is “hopeful” that federal officials will make an announcement about SVB’s collapse before the market opens.
McCarthy said in an appearance on Fox News’ “Sunday Morning Futures” that he spoke with Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen after regulators shut down SVB.
“They do have the tools to handle the current situation, they know the seriousness of this situation and they are working to try to come up with some kind of announcement before the markets open,” McCarthy said. “Hopefully something can be announced today to move forward.”
McCarthy added that he believed it was “very likely” that a buyer would be found for SVB, which he believed would be the “best outcome to move forward and cool the markets”.
Rep. Josh Gottheimer of New Jersey, the top Democrat on Problem Solving, plans to call on federal regulators to “act quickly to reassure consumers,” according to a draft letter obtained by NBC News that has not yet been sent. . Gottheimer is currently in the process of collecting signatures.
“To be clear: we do not believe that regulators should help SVB shareholders,” the letter said, referring to takeover discussions that Yellen has already downplayed. “At this time, we are concerned for depositors of SVB and banks across the country, suddenly reeling from the catastrophic failure of SVB that unfolded in just forty-eight hours, precipitated, in part, by social media and package withdrawals ».
Yellen said Sunday on CBS’ “Face the Nation” that there would be no bailout. He added that the federal government is trying to find a way to help depositors.
The draft letter also urges the Treasury Department and the Federal Reserve to prioritize finding a buyer for SVB. encourage banks that have relationships with SVB depositors to extend temporary credit lines to help with essential costs such as payroll. offer liquidity through repurchase agreements. It also calls on Congress and the Fed to consider temporarily raising the FDIC limit on deposit insurance above $250,000.
Members of California’s congressional delegation were also briefed on SVB Saturday night by the FDIC, multiple House and Senate offices told NBC News.
Rep. Katie Porter, D-Calif., said rising interest rates were a factor behind SVB’s closing, along with the Covid-19 pandemic and “in some ways, the bank’s own management strategy.”
“There are real questions about why the bank didn’t predict one of the most fundamental economic facts that everybody should know, which is that interest rates go up and down,” Porter said in an interview with MSNBC.Sunday’s show.”
“You can’t bet they’re going to stay low forever,” he added. “They didn’t — they went up and the bank wasn’t prepared and there are some real supervisory questions about that.”
Porter said in a tweet Saturday that she was working on legislation.
“Silicon Valley Bank’s Collapse Was Completely Avoidable,” she wrote. “In 2018, Wall Street pushed through a deregulation bill that allowed banks like SVB to take reckless risks. It passed, even though I and many others warned of the dangers. I’m writing legislation to reverse this law, S. 2155.”
Rep. Ro Khanna, D-Calif., said buyouts would be “the ideal situation” and that the California delegation “made that clear” when it spoke to the FDIC Saturday night.
“That’s what we urged them to work on. They said they are working on it. But for that to happen, you need the FDIC and the Treasury Department to get involved because these assets are illiquid and may be repaid 10 years from now,” Khanna told CBS News’ “Face the Nation.” “I don’t think you’re going to get a private seller without the Treasury and the FDIC being actively involved in helping with liquidity with these bonds.”
Senate Banking Committee staff were briefed in a phone call Saturday night, and plans are being made to brief committee members this week, congressional aides told NBC News.
Hearings looking into the matter have not been closed but have not been set, aides said.