Hochul pledges taxpayers won’t be on hook for bank failure

(The Center Square) — New York Gov. Kathy Hochul is pledging to protect money held by investors in the failed Signature Bank and insisting its takeover by the federal government won’t be a taxpayer-funded bail out.

On Sunday, the Federal Deposit Insurance Corporation took over New York-based Signature Bank’s assets worth more than $110 billion, and more than $88 billion in deposits.

The move came after a panic-induced run drained billions of dollars in deposits, prompting New York regulators to shut the bank down and turn it over to federal regulators.

Signature is the third largest bank in U.S. history to fail financially, and its demise comes days after the collapse of Silicon Valley Bank and crypto-friendly bank Silvergate Capital Corp. The flurry of bank failures prompted the Federal Reserve to roll out new programs aimed at ensuring depositors can access their money.

“This is an unusual circumstance,” Hochul said in remarks Monday. “But the main message I want to deliver is that New Yorkers should have confidence that their money is secure, and wherever they have chosen to bank, that that is protected.”

The Democrat insisted the move was not a “bail out” of the bank that would put the state’s taxpayers at financial risk, noting that money to guarantee deposits will come from an existing fee paid by the federally insured banks.

Hochul said her administration has been working with the federal government for days “to stabilize the banking sector and protect the hard-earned money of New Yorkers whose livelihoods depend on impacted companies.”

She welcomed the move by the feds to sweep the bank into receivership, saying it will “provide increased confidence in the stability of our banking system.”

“Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York’s robust economy,” Hochul said.

Depositors at Signature Bank will have full access to their money, but New York regulators say shareholders and some unsecured debt holders will likely not be protected.

On Monday, the United Kingdom’s Treasury and the Bank of England announced they had facilitated the sale of Silicon Valley Bank UK to HSBC, Europe’s biggest bank, ensuring $8.1 billion of deposits. Federal regulators are still looking for a buyer for the bank’s U.S. holdings.

The collapse of the banks has sent shockwaves through states where they have a presence, with governors and state regulators scrambling for details from the federal government and putting together plans to help cushion the financial impact on businesses.

In neighboring New Jersey, Gov. Phil Murphy on Monday rolled out a new support program for businesses impacted by the bank failures, with $35 million in funding available.

“Our goal is to ensure that every New Jersey company caught up in this mess is able to keep the lights turned on, meet payroll, pay rent and continue their day-to-day operations,” Murphy said.

President Joe Biden addressed the failure of the banks in live televised remarks on Monday, pledging that investors’ money is protected and that banks won’t be bailed out again by taxpayers, as they were in 2008. He said the money will come from the FDIC’s deposit insurance fund.

“No losses will be borne by the taxpayers,” Biden said. “Because of the actions that our regulators have already taken, every American should feel confident that their deposits will be there if and when they need them.”

Biden called on Congress to pass legislation to “strengthen rules” on banks to prevent future failures.