Your bank fees to rise to pay for Biden’s bank bailout

By Taxpayers Association of Oregon

President Biden is promising no taxpayer bailout of the high-risk bank, SVB, but what Biden says may not be true.

The Wall Street Journal explains, “Uninsured deposits normally take a 10% to 15% hair cut during a bank failure. Some 85% to 90% of SVB’s $173 billion in deposits are uninsured. The cost of this guarantee could be $15 billion. The White House says special assessments will be levied on banks to recoup these losses. That means bank customers with less than $250,000 in deposits will indirectly pay for this through higher bank fees. In other words, this is an income transfer from average Americans to deep-pocketed investors.”

Key facts:

• SVB was a high risk bank because over 80% of their deposits were over the FDIC protection amount, when it is common for bank to have only 40% exceed that amount.
• SVB was a high risk bank because they focused on higher risk start-ups
• SVB was a high risk bank because they actively ignored the rise of interest rates and did not adjust their low-interest holdings to accommodate like other banks
• SVB had no chief risk manger for much of 2022.
• JP Morgan analysts warned last Fall of SVB with $16 billion at risk
• The number of people betting (real money) that SVB would fail rose by 6x before it’s collapse
• In normal bank problems, the Feds work to find a buyer by another larger investment firm.  Yet, Biden is pushing for a full 100% bailout.
• In normal bank problems, depositors often suffer a 10-15% loss.  Yet, Biden wants a no-loss, full bailout at the cost of taxpayers through bank fees.

Hollman Jenkins writes in the Wall Street Journal, “In essence, out of the blue, the risks that large, sophisticated uninsured depositors had willingly accepted were shifted to bank shareholders and U.S. taxpayers so Joe Biden could have a pleasanter start to his week than otherwise would have been the case.  One bird has flown, and that’s moral hazard, or the idea that bailouts only encourage the behavior that makes bailouts necessary. Don’t buy the claim that bank shareholders and CEOs are being taught a lesson. By guaranteeing all deposits, government actually makes banks an even more attractive source of funding for swing-for-the-fences bets by politically adroit, high-rolling bank entrepreneurs and executives.”

Further background:

We understand that there is a role for the Federal government to help in times of financial crisis.  For instance, in the past, the Feds have provided temporary aid to financial institutions and the financial aid was fully paid back.   We also understand that this situation is evolving in real time with many key factors yet unveiled and that there maybe a real risk of contagion.  We are concerned that taxpayers (via fees) are being asked to help pay for the problem of a high risk institution as a first resort and could set the standard that taxpayers are expected to pay for all the problems resulting from a financial crisis.


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