Tag: bailout
No Federal Bailout for SVB, Says US. Bank Had Weakened Regulations, Paid Bonuses
The Associated Press reports that deposits insured by the federal government are supposed to be available by Monday morning…
The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy people who used the bank — known for its relationships with technology startups and venture capital — had more than that amount in their account. There are fears that some workers across the country won’t receive their paychecks….
[Yellen] emphasized that the situation was much different from the financial crisis almost 15 years ago, which led to bank bailouts to protect the industry. “We’re not going to do that again,” she said. “But we are concerned about depositors, and we’re focused on trying to meet their needs….”
Silicon Valley Bank is the nation’s 16th-largest bank. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008. The bank served mostly technology workers and venture capital-backed companies, including some of the industry’s best-known brands…. Yellen said she expected regulators to consider “a wide range of available options,” including the acquisition of Silicon Valley Bank by another institution. So far, however, no buyer has stepped forward.
CNBC reports that just hours before regulators seized the failing bank — employees were paid their annual bonuses, “according to people with knowledge of the payments.”
And the Intercept reports that earlier the bank had successfully lobbied for the rollback of protective rules established in the wake of the 2008 financial crisis. “The lobbying effort managed to exempt banks the size of Silicon Valley Bank from more stringent regulations, including stress tests aimed at uncovering the type of weaknesses that led to the bank’s implosion Friday.”
But the Washington Post reported that as dramatic as the seizure is, “one thing it doesn’t seem likely to do — at least for now — is trigger a wider financial meltdown, banking experts said.”
Unlike the giant banks that ignited a global crisis in 2008, SVB was heavily dependent upon a single risky sector of the economy for both its depositors and its customers. That concentrated bet proved to be very bad news for the ambitious start-ups that dominate the high-technology world. But it means that the tech-friendly bank lacked the sophisticated financial entanglements with other institutions that can turn one bank’s losses into a threat to the entire industry.
Read more of this story at Slashdot.
Government officials fly to China to win support for British Steel bailout
FTX: Cryptocurrency giant Binance walks away from bailout
Binance passes on FTX bailout, FTX.com goes down
FTX, the world’s fourth largest cryptocurrency exchange, is seemingly kaput.
Binance, the leading global crypto exchange, announced on Wednesday that it had decided to not acquire FTX after a due diligence investigation.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX․com,” Binance announced on its Twitter account. “In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.”
FTX was founded by Sam Bankman-Fried, or SBF, an industry leader who had become known for swooping in to bail out failing crypto companies. Now, it seems no one in the industry wants to bail him out.
The latest news that Binance mentions in its statement is in reference to a Bloomberg report from earlier in the day which says that the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are currently investigating SBF’s companies FTX and Alameda for mishandling customer funds.
Changpeng Zhao, the founder of Binance, initially announced on Tuesday that the company entered a non-binding agreement with FTX after speaking with its founder, Sam Bankman-Fried. Reports have been circulating for days regarding the liquidity of SBF’s crypto empire after internal balance sheets leaked.
Things very quickly began to fall apart as Changpeng Zhao, or CZ for short, announced it was selling off any of its holdings of FTX’s crypto token, FTT. As news continued to spread, FTX ended up experiencing $6 billion in customer withdrawals within a 72 hour period.
Before backing out of the acquisition, CZ publicly shared a memo he sent to Binance employees explaining how the company had not planned for its competitor’s collapse and that FTX’s failure is not actually good for the crypto industry as a whole.
“Sad day, tried but…” CZ tweeted, adding in a crying face emoji.
FTX was in talks to raise $1 billion at a $32 billion valuation just six weeks ago. As of Wednesday, FTX’s website, FTX.com was experiencing outages.
“Something went wrong,” read a prompt on the website when it was down.