Systemic Ruling Stems Run Risk, Opens Sweeping Policy Debate

After a frantic weekend, the Treasury, Fed, and FDIC decided on an SVB package protecting not only insured, but also uninsured, depositors at both SVB and Signature Bank, which was closed earlier this evening.  Insured depositories will pay for the cost of these FDIC resolutions through special assessments.  At the same time, the Federal Reserve announced a new window to provide emergency liquidity to banks that values collateral at par rather than forcing borrowers to liquidate securities now subject to specific mark-to-market loss.  The new facility, which appears unlimited, is backed by a $25 billion commitment from Treasury’s exchange Stabilization Fund, the same go-to window the Board used in 2020 to satisfy requirements for innovative emergency-liquidity facilities.