A March 13 Facebook post (direct link, archived link) makes a claim about Silicon Valley Bank’s March 10 collapse.
“Biden bails out SVB bank with your tax dollars,” reads the post. “Rich people will be taking (sic) care of, more perks from Democrats.”
Similar posts have been shared on Facebook.
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President Joe Biden, multiple federal agencies and experts said no direct taxpayer funds will be used to address Silicon Valley Bank’s collapse. The bank’s depositors will instead be covered by funds from the Federal Deposit Insurance Corporation and its Deposit Insurance Fund, which is funded by assessments paid by banks and interest earned on government investments.
Silicon Valley Bank collapsed on March 10 after its depositors – mainly consisting of technology workers and venture-capital-backed companies – withdrew their money amid the bank’s rapid decline in shares, as USA TODAY reported.
The Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation (FDIC) said in a March 12 press release that it will compensate for depositors’ losses, excluding shareholders and certain unsecured debtholders, using funds from the FDIC.
Contrary to the post’s claim, taxpayers will bear “no losses associated with the resolution of Silicon Valley Bank,” according to the press release
The FDIC already offers its customers insurance for up to $250,000 in deposits if a bank fails, as USA TODAY reported. Any additional protection for insured customers above the $250,000 limit and losses from uninsured depositors will come from the FDIC’s Deposit Insurance Fund, according to CNBC News and the press release.
The Deposit Insurance Fund consists of quarterly assessments that a bank pays based on its total liabilities and interest earned on funds invested in government obligations, according to the FDIC. No federal or state tax revenues are involved in the fund.
Biden and other public officials reiterated in tweets and press releases that taxpayer funds will not be affected by the bank’s collapse.
Fact check: Posts wrongly tie Silicon Valley Bank and Lehman Brothers end to Joseph Gentile
Any taxpayer connection to the FDIC payments is indirect, experts say.
Ken Kuttner, a professor of economics at Williamson University, said a bank could pay its FDIC fees by passing on the cost to depositors in the form of fees and lower interest rates on deposits or to shareholders.
“Either way, since ‘people’ own the banks, somebody will pay for those assessments; the question is whether it’s the shareholders or the customers,” Kuttner said. “And all of these people – taxpayers and customers – are taxpayers, so in that sense ‘taxpayers’ are paying the cost – but not via their tax payments.”
Kuttner also noted tax revenues will not be used to address the bank’s collapse at this point.
“The FDIC will be drawing on the funds it has accumulated over the years and therefore doesn’t need any financial assistance from the Treasury,” Kuttner said.
It is possible that losses from a bank or series of banks could eventually exceed what can be covered by the deposit insurance fund, putting taxpayers directly on the hook for that coverage, according to Will McBride, the vice president of federal tax policy at the Tax Foundation.
“But that is not the case currently and would only happen in a much more severe financial crisis and economic downturn than we’ve seen so far,” he said in an email.
The Deposit Insurance Fund has over $100 billion as of March 12, according to CNBC News.
Any losses to the Deposit Insurance Fund “will be recovered by a special assessment on banks” in accordance with the law, according to the joint press release.
USA TODAY reached out to the social media users who shared the claim for comment.
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