The Biden administration stated in their Bank Term Funding Program (BTFP) announcement that “no losses associated with the resolution of Silicon Valley Bank (SVB) and Signature Bank will be borne by the taxpayer,” but just because it does not increase taxes, that does not mean it will not raise costs for the average American, economists warn.
BTFP covers all losses, not just those up to $250,000, and the reimbursement money will come from the taxpayer-backed Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC). The DIF had a balance of $128.2 billion at the end of 2022, according to the FDIC, while Silicon Valley Bank said it had $212 billion in assets and Signature Bank said it had $114 billion in assets. (RELATED: Former Dem Rep Behind Landmark Financial Reform Law Is On The Board Of NY Bank That Biden Is Bailing Out)
“Disingenuous: that’s the right word to describe anyone (Treasury official or not) who claims the DIF is not ultimately backed by the taxpayer,” MIT economist Simon Johnson told the Washington Post’s Jeff Stein. However, Johnson believes this package is a positive development, telling the Daily Caller News Foundation it is, “good for the American taxpayer, saves the economy, and prevents recession.”
Heritage Foundation economist E.J. Antoni disagrees. “This complicates [the Fed’s] belated fight against inflation. As is often the case with government intervention, the cure is worse than the disease,” he told the DCNF.
“This is a bailout of Silicon Valley billionaires that is going to be paid by mom-and-pop depositors,” Dr. Thomas Hogan, senior economic research faculty and former chief economist for the senate’s committee on banking housing and urban affairs, told the DCNF. He further explained any insured depositor at a regular bank will be charged an extra amount to replete the DIF with special assessments and insurance premiums, leading to failed banks being paid by small depositors.
To make up for the reimbursements from the DIF, it is the banks insured by the FDIC that will need to pay a tax, but they may pass on that cost by charging more money to their customers through increased credit card fees, according to the New York Times. This bailout will punish average Americans rather than the bank executives such as Greg Becker, the CEO of SVP who sold $3.6 million in stock before his bank collapsed.
While not all assets are deposits that require reimbursement by the FDIC, making SVB and Signature Bank clients whole will consume a significant portion of the DIF, according to National Review. However, a senior Treasury Department official who spoke to reporters anonymously said it was “more than fully sufficient” and echoed that the taxpayer will not bear the costs for this, according to CNBC.
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