Government Response On Monday, March 13, 2023, the federal government announced a multi-part plan to secure the depositor’s money in the bank.6 President Biden announced that SVB depositors and Signature Bank depositors would be made whole. The Federal Reserve has also created a new Bank Term Funding Program (BTFP), which will provide land to banks, credit unions, and other depository institutions to provide more liquidity for banks. By offering these short-term loans, the banks will not need to sell assets quickly at unfavorable terms. The BTFP will be able to borrow up to $25 billion from the Exchange Stabilization Fund as a backstop.7 The loans, though, are only available with the personal approval of Treasury Secretary Janet Yellen. The Federal Reserve announced that the discount window will remain open to provide more liquidity to banks. The discount window applies the same margins as the BTFP to a wide array of assets as collateral for loans. Finally, as a last measure, President Biden announced that none of the losses would be borne by taxpayers. The losses will instead be paid by the Deposit Insurance Fund, which is funded by assessments on banks to cover such losses. A Tough Economy for Banks The past three years have been particularly difficult for banks beginning with the pandemic that started in March 2020. This led to a national shutdown, large operating losses for businesses, payroll issues for restaurants and small businesses, the loss of employees to the so-called Great Resignation, and the seemingly always strained supply chain. And, as if the above reasons were not causing enough pressure on banks, the rising interest rates and inflation after years of quantitative easing have increased pressure on banks from all sides. The supply chain issue has been especially tough on Midwest banks, lending to farmers who themselves have been squeezed by the rising gas prices and the rising cost of fertilizer due to sanctions against Russia. In addition to the business pressures, an economic slowdown inevitably leads to increased cases of fraud, investigations, and, ultimately, oversight. Warren Buffet once said that “Only when the tide goes out do you discover who's been swimming naked.” We are now, unfortunately, seeing the results of a falling tide. The Department of Justice is ramping up its investigation of PPP loan fraud or other incentives intended to help cashstrapped businesses during the pandemic.8 The FBI, through its Internet Crime Complaint Center (IC3),9 has published its 17
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