FDIC Seizure of Foreign Deposits at SVB Opens Pandora’s Box at JPMorgan Chase and Citi – Which Hold a Combined $1 Trillion in Foreign Deposits with No FDIC Insurance
By Pam Martens and Russ Martens: May 15, 2023 ~
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If you have been following the banking crisis, you have likely read at least a dozen times that on March 12 federal banking regulators, with the consent of the U.S. Treasury Secretary Janet Yellen, invoked the “systemic risk exception” in order to protect both insured and uninsured depositors at the two banks that failed in March – Silicon Valley Bank and Signature Bank.
That’s why there were gasps of shock on Saturday evening at around 5:30 p.m. when the Wall Street Journal (paywall) published the stunning news that depositors in the Cayman Islands’ branch of Silicon Valley Bank had their deposits seized by the Federal Deposit Insurance Corporation (FDIC), which they are unlikely to ever see again.
As Wall Street On Parade has previously reported, under statute, the FDIC cannot insure deposits held on foreign soil by U.S. banks. What it can do, however, is to sell those deposits to the bank that acquires the collapsed bank. In the case of Silicon Valley Bank, the acquiring bank was First Citizens Bancshares which, apparently, declined to purchase the foreign deposits in the secrecy jurisdiction of the Cayman Islands, a jurisdiction most notable recently for housing Sam Bankman-Fried’s crypto house of frauds.
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It’s hard to imagine any Gooferment policy, program, or agency that doesn’t far outlive its usefulness.
In this case, foreign depositors get screwed.
Soon it will be US depositors. Time to unwind all the Government Sponsored Entities — FDIC, FHA, FHLB, Fannie, Freddie, and Sallie.
Before it’s too late!
If it isn’t already.