Treasury Department officials have paid especially close attention to the flows of deposits in the wake of their actions Sunday to extend a federal backstop to all of Silicon Valley Bank’s deposits in order to ensure access to all of those funds on Monday.
And the department has seen signs that deposit outflows from small and midsized lenders have slowed, according to a senior Treasury official.
White House and Treasury Department officials spent the day in contact with regulators and bank executives as they monitored the effect of their dramatic emergency actions over the weekend.
While the early reports don’t mean the risks have dissipated, they do signal that a central component of the administration’s strategy – sending a clear message to depositors that their deposits were, in fact, safe – has had an effect.
“The thing we were targeting was uninsured depositors feeling as if they weren’t protected,” the official said. “The scale and the breadth of what we did has sent that message.”
While regional bank stocks have been hammered throughout the day, there’s also some cautious optimism that their efforts are having an effect as Wall Street firms – most notably JPMorgan – have opened up new lines of credit to some of the most at-risk banks.
Smaller lenders, also viewed as potentially at risk in the event of contagion, have reported stable conditions.
It’s clear, however, that administration officials are bracing for – and moving quickly to try and frame – the political fallout. President Joe Biden’s remarks before departing for his West Coast trip included implicit nods to that reality.
The focus on new regulations is tied to that, as was Biden’s explicit, and repeated, assurances that taxpayer dollars are not at risk.
“This is an important point – no losses will be borne by the taxpayers,” Biden said. “Let me repeat that: No losses will be borne by the taxpayers.”