(NewsReady.com) – The controversy surrounding the federal government’s decision to take control of Silicon Valley Bank (SVB) when it failed on March 10, continues. President Joe Biden’s administration has promised that nobody who had their money in the bank will lose any of it. That decision annoyed “Shark Tank’s” Kevin “Mr. Wonderful” O’Leary.
O’Leary appeared on the Fox News show “Hannity” to discuss the SVB bailout and collapse. The bank failed after panicked customers began pulling their money out of the institution. By the end of the day, the bank had failed, and the government had to step in. The “Shark Tank” alumni said the “bank was run by idiots.”
The businessman said people who keep more than $250,000 in a bank know the risks. The FDIC only insures up to $250,000 per person per bank. He said he understands the government wants to “keep confidence in the banking system.” But he wishes it had just let SVB fail because of its terrible management.
O’Leary’s digs at the management might be in reference to the bank’s decision to invest in long-term Treasury bonds. When the Federal Reserve began raising interest rates, those bonds were worth less money. SVB had to withdraw the money early at these lower rates to meet its customers’ withdrawal demands. This led to its financial problems.
According to O’Leary, he won’t invest in bank stocks anymore because he said the “regulatory environment on small banks” will be so punitive, they won’t be able to make money..
The Biden Administration bailed out SVB and Signature Bank depositors by using a loophole in the law that would have otherwise only allowed them to recoup $250,000. It’s known as the Systematic Risk Exemption, an exception to the Federal Deposit Insurance Corporation Improvement Act of 1991. It allows the Treasury Department to secure all of a failed bank’s deposits if officials determine it reduces “serious adverse effects” on the overall economy.
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