SALT LAKE CITY, UTAH — Attorney General Sean D. Reyes joined a comment letter to the Chairman of the Federal Deposit Insurance Corporation (FDIC), led by the state of Oklahoma, opposing the FDIC’s proposed rule imposing a special assessment on FDIC-insured banks to pay for the bailout of uninsured depositors of Silicon Valley Bank (SVB) and Signature Bank (Signature).
In March of this year, SVB and Signature abruptly closed, making them two of the largest bank failures in our nation’s history — and the most significant since the Financial Crisis of 2007-2008. Shortly thereafter, the Biden administration announced it would invoke the “systemic risk exception” (SRE) to reimburse uninsured depositors (i.e., depositors with more than $250,000 in their account) for their losses. The special assessment, if finalized by the FDIC, would recoup the FDIC’s losses from the bailout through a fee imposed on other FDIC-insured banks.
In their letter, the attorneys general argue that “the Federal Government’s reckless decision to invoke a systemic risk exception to bail out the elite clientele of SVB and Signature will have far-reaching and disastrous consequences” and that “the FDIC’s misguided priorities and neglect in oversight caused the crisis that predicated the invocation of a SRE to bail out SVB and Signature.”
The States write that “it is fundamentally unfair to pass on special assessment costs to other banking institutions who engaged in responsible business practices, unlike SVB and Signature. The States reiterate that it would be even more fundamentally unfair to pass on special assessment costs to community banks.”
Joining Oklahoma and Utah were the states of Idaho, Louisiana, Mississippi, South Carolina, South Dakota, Tennessee, and Texas.