That’s what makes it so astonishing that the regulators missed it,” the GOP aide added.

Nobody else even comes close to the problem that this bank had. “There was no bank in the country with a larger liquidity mismatch than SVB. The Republican aide argued that Silicon Valley Bank’s collapse doesn’t call for a new wave of regulation because its circumstances of its liquidity shortfall don’t affect the vast majority of other banks. “How the hell did the regulator miss this? That’s the whole point of supervisory examination, to spot this type of thing,” the aide added. It didn’t matter what artificial regulatory you put into place, you could not overcome the underlying fundamentals of the mismatch and the high rate of uninsured deposits,” said a second GOP aide. They had 10 percent insured deposits, they had massive unrealized losses because their portfolio was weighted in long-duration debt so they had a liquidity mismatch. They argue that federal regulators have become too preoccupied with climate and other “woke” issues to watch out for fundamental problems. Some Republicans, on the other hand, blamed Silicon Valley Bank’s downfall on a lack of proper oversight from the Federal Reserve Bank of San Francisco. Lawmakers on both sides of the aisle spent Sunday assuring voters they were against a bailout. “I’m sure there will be people who take the view that there shouldn’t be government intervention on any of this,” the aide said.

Still, there is already disagreement over what constitutes a “bailout” and the fund being used to pay depositors - including over the $250,000 for standard insurance from the FDIC - is backed by “the full faith and credit of the United States government.”Īnd some conservative Republicans are already making the argument that covering depositors above the FDIC’s regular $250,000 deposit insurance limit is creating a future moral hazard and could embolden risky behavior heading forward.Ī GOP aide predicted that more conservatives would push that argument once they return to Washington and have more time to examine the details of Biden’s intervention. The president said the money to cover depositors would come from the fees banks pay into the Federal Deposit Insurance Corporation (FDIC) and promised that managers at failed banks would be fired and stock-holding investors would not be protected - sidestepping a fight with Congress.

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