‘The Billionaire Bailout’: FDIC Chair Says the Biggest Deposit Accounts at SVB Held $13 Billion

By Jake Johnson, staff writer at Common Dreams. 

In prepared testimony for a Senate Banking Committee hearing slated for Tuesday morning, the chair of the Federal Deposit Insurance Corporation reveals that the 10 largest deposit accounts at Silicon Valley Bank held a combined $13.3 billion, a detail that’s likely to intensify criticism of federal regulators’ intervention in the firm’s recent collapse.

When SVB was spiraling earlier this month, the FDIC, Treasury Department, and Federal Reserve rushed in to backstop the financial system and make all depositors at the California bank whole, including those with accounts over $250,000—the total amount typically covered by FDIC insurance.

“At SVB, the depositors protected by the guarantee of uninsured depositors included not only small and mid-size business customers but also customers with very large account balances,” FDIC chief Martin Gruenberg writes in his prepared testimony. “The ten largest deposit accounts at SVB held $13.3 billion, in the aggregate.”

Gruenberg goes on to estimate that the FDIC’s $125 billion Deposit Insurance Fund (DIF)—which is financed primarily by assessments on insured banks and “backed by the full faith and credit of the United States government”—took a $20 billion hit as a result of the SVB intervention.

According to Gruenberg, nearly 90%—$18 billion—of the DIF loss stemming from SVB is “attributable to the cost of covering uninsured deposits.” He added that the DIF absorbed a roughly $1.6 billion cost to cover uninsured deposits at Signature Bank, which failed shortly after SVB.

The FDIC chair’s testimony comes as federal regulators continue to face scrutiny for glaring oversight failures in the lead-up to the collapse and backlash over the emergency response, which many have characterized as a bailout for the wealthy and well-connected given SVB’s role as a major lender to venture capital and tech startups.

Billionaire Peter Thiel, whose firm was accused of helping spark a bank run by advising clients to pull their money from SVB, told the Financial Times that he had $50 million in a personal account at the bank when it failed earlier this month.

“The bailout really did protect billionaires from taking a modest haircut,” Matt Stoller of the American Economic Liberties Project tweeted in response to Gruenberg’s testimony.

Writing for The American Prospect on Monday, Revolving Door Project researcher Dylan Gyauch-Lewis called the federal government’s swift action in the wake of SVB’s failure “a good illustration of the enormous class bias in American policymaking.”

“As soon as corporations and the wealthy run into trouble, elites trip over themselves, discarding both law and precedent, to rescue them,” Gyauch-Lewis wrote, noting that federal regulators had to classify SVB’s collapse as a “systemic risk” to the financial system—a disputed characterization—in order to legally guarantee deposits over $250,000.

For contrast, Gyauch-Lewis added, “consider student loan forgiveness. The legal justification is clear as day, and the authority itself is used regularly. According to the Higher Education Relief Opportunities for Students Act of 2003, the Education Department can forgive student loans as it sees fit in a national emergency.”

“At bottom, the core reason SVB’s depositors got bailed out had little to do with morals or even financial risk,” Gyauch-Lewis argued. “It happened because they had rich and powerful friends with the ear of the president’s chief of staff. Broke students don’t. The students have to organize and campaign for decades to get something far worse than what they wanted, and for that to hang in the balance at the Supreme Court. The SVB depositors just had to whine on Twitter and make a few calls.”

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    1. Cristobal

      Why don’t we just drone him?
      —– Hillary Clinton

      Is sauce for the goose sauce for the gander?

  1. Mikel


    This article uses the frame of it not being a bailout in the first paragraph (laughable) and proceeds to describe to readers a bailout and then some:

    “In the case of Silicon Valley Bank, which collapsed earlier this month, the headline number showed the FDIC offering First Citizens BancShares Inc. a hefty discount to buy the lender. But the agency also tossed in a $70 billion credit line and agreed to cover First Citizens’ losses in excess of $5 billion on commercial loans for the next five years, and extended $35 billion of borrowings to the bank in the form of a note.

    When New York Community Bancorp Inc. took over Signature Bank’s deposits and some of its loans after the bank was seized by regulators, it scored a sweetheart deal, Wedbush analyst David Chiaverini said. The assets were “priced to move quickly,” he said, pointing to a 20% earning-per-share boost from the deal. What’s more, the FDIC excluded some of the more problematic deposits from the transaction. The stock gained 32% after the plan was announced…”

    I guess they call it “deal sweeteners” instead of “bailouts” now.

  2. jo6pac

    Well I for one am truly happy that no billionaires will have to change their life style;-)

    Bob Tetrault


    1. Jeremy Grimm

      I may be wrong — but I rather doubt taking the loss would have impacted the lifestyles of most/all of the billionaires any I believe one person can only live materially so large in life. [Too many Economics classes — remember the candy-bars example.] However, it might have affected their status among other billionaires and it might also have damaged their brand and their implicit political clout a little bit. Gyauch-Lewis: “It happened because they had rich and powerful friends with the ear of the president’s chief of staff….” Not getting bailed out would have damaged the ‘Cred’ of a few billionaires.

      1. Glen

        I remember checking the numbers when Michael Bloomberg ran for office. He could spend a million dollars a day on his campaign for 157 years assuming his fortune was capped. But he’s earning money on his fortune so he could possibly spend even more, and for longer.

        People don’t realize how much money billionares really have, and how much power that gives them. Why even bother to pretend you “support” our country when you have bought estates in many countries, and employ people that have every critical person in those governments of those countries on speed dial (plus our country) and have supported them all generously with “free speech” megabucks.

  3. Mildred Montana

    From the article: “Billionaire Peter Thiel, whose firm was accused of helping spark a bank run by advising clients to pull their money from SVB, told the Financial Times that he had $50 million in a personal account at the bank when it failed earlier this month.”

    Peter Thiel (net worth currently estimated at $4.2B) can’t handle a $50M, 1% haircut? He, a man who wants to live forever and is working on it? Can the economy afford to bail him out for eternity?

      1. Mildred Montana

        I read that article. Apparently his “kept man” gave up his “freedom” and his “dreams” (were those all he had?) for a $300,000 car and a $13M mansion.

        I’m not at all surprised he killed himself. Those who “marry” (in the loose, modern vernacular) for money usually earn it. The price they pay for that expensive car and mansion is unhappiness, emptiness, and loneliness. Some pay it, others don’t. Thiel’s kept man decided not to.

    1. Mikel

      Even Trump is more of a “win some, lose some” type with money. He wears bankruptcies like a badge of honor.

      1. Oh

        I doubt if any of his bankruptcies hurt him. He probably stiffed a lot of people and came out ahead financially>

    2. Mark Gisleson

      Not a fan of Thiel, but how is it that we just read his name but not the names of the ten billionaires who’d piled up $13 billion in the bank? The fifty million is pretty disgusting, but what kind of billionaire leaves that much money parked in a bank account?

      These billionaires have more wealth than they know what to do with, yet freak out at the prospect of losing any of it, demand—and get—special treatment.

      This is a problem begging a Game of Thrones solution. Gold crowns all around?

      1. Greg

        I’m also keen to know who the individuals and businesses were, but for another reason.

        I’m willing to bet these depositors *did* take a haircut, in the form of a modest disbursement to political actors able to influence FDIC decision making. We won’t be able to track that without knowing who they are.

  4. earthling

    I’ve seen $20 billion kicked around as the cost of this bailout. That was the size of the judgement against BP for the giant Macondo oil spill, for remediating damage across all the Gulf waters and states. A huge amount of money, because it affected so much land and water, and so many people.

    Here we have unelected clowns passing out this much money in response to a little pressure from a few people who refuse to suck it up and deal with their own imprudent investment. Sickening.

  5. LifelongLib

    Well, you could also argue that the $250k (or any) limit is a form of means testing. Along with billionaires, I imagine there are a number of well-off rock stars and ballplayers who have more money than that. In general I don’t think that putting an arbitrary limit on bank account protection is the best way to address disparities in wealth.

    1. Objective Ace

      The arbitrary limit isnt only on the amount protected, its also the amount that banks pay insurance on. The reasoning being, if the FDIC isnt on hook for it, why should the elites have to pay insurance on it?.. Of course it turns out they were on the hook for it–which is the real problem with regards to fairness

      1. LifelongLib

        So should there be some sort of tier system where (say) the first $250k is insured for free, with fees (maybe progressive like income tax) for larger amounts? I’m surprised something like that doesn’t already exist. There’s probably some actuarial reason it wouldn’t work. Or maybe the wealthy figure that when push comes to shove they’ll get bailed out anyway.

        1. Objective Ace

          Non of it should be insured for free. As of now the banks all pay a little bit for all the deposits beneath 250k (and consequently pass that onto the depositors in the form of lower interest). That system should have been in effect for all deposits above 250k too apparently

  6. griffen

    Biden administration. “It’s Trump’s fault. Anything bad happening on our watch is the Orange Man’s failure at all things, at all times.” \SARC

    I wish the statement above was possibly less real and more sarcasm, but alas in 2023 it’s where we’re at. Yeah, the regs got a little easier in 2018 but the regulators were still on the job. The west coast locations for the Federal Reserve and the FHLB aren’t smelling roses I don’t think.

    All depositors are important, but some are just really, really more important than others.

  7. Trainer

    It’s possible a large portion of the FDIC’s $20 billion in Silicon Valley Bank losses are a consequence of credit issues with this bank’s loan portfolio.

    Banks take deposits, and use them to make loans or to buy securities. When Silicon Valley Bank collapsed what remained was a pool of liabilities they owed their customers (insured and uninsured deposits), and a matching pool of assets where they invested this customer money (loans and bonds). Page 6 of this document describing the acquisition of Silicon Valley Bridge Bank shows that First Citizens BancShares acquired $72 billion in Silicon Valley Bank loans, and assumed responsibility for only $56 billion in the deposit liabilities that back them. It also shows the FDIC loaned First Citizens $35 billion to provide liquidity, in case some of its new $56 billion in SVB depositors want to move their money somewhere else. And the FDIC agreed to a “Five-year loss share agreement (stipulating) that the FDIC will reimburse First Citizens for 50% of losses on commercial loans in excess of $5 billion”. First Citizens describes these terms as an “Asset discount and loss share agreement with the FDIC (that) provides downside protection against credit risk”. This means First Citizens required significant credit protection before agreeing to buy a massive pool of loans made to Silicon Valley startups, and to unicorns, and to the various VC’s that back them.

    The ‘asset discount’ they are referring to is First Citizens purchased about $72 billion of Silicon Valley Bank loans while only assuming $56 billion in deposits to back them – a discount of $16.5 billion. This is larger than the $15 billion unrealized loss in SVB’s securities portfolio that caused it to collapse in the fist place (it had $91 billion in its held-to-maturity securities portfolio that was worth just $76 billion at the end of 2022).

    The FDIC will hold on to SVB’s securities portfolio, which has large unrealized losses now, but these losses will disappear if the FDIC chooses to hold each bond until it matures (they are most if not all U.S. treasury and agency bonds). It’s unclear how much of the FDIC’s $20 billion in estimated SVB losses are attributed to this securities portfolio.

    But there was a $16.5 billion ‘discount’ of Silicon Valley Banks entire loan portfolio, which was ‘realized’ yesterday, plus an agreement where the FDIC will reimburse First Citizens for 50% of losses on any of these (commercial) loans in excess of $5 billion. And these together look suspiciously close to $20 billion in FDIC fund losses which are needed to repay insured and uninsured depositors.

    Ultimately time will tell what portion of these taxpayer losses are securities related (a consequence of interest rate risk), and what portion of these losses are loan related (a consequence of startup company credit risk).

    1. notabanker

      Next time read the article:
      “According to Gruenberg, nearly 90%—$18 billion—of the DIF loss stemming from SVB is “attributable to the cost of covering uninsured deposits.”

      1. Trainer

        Depositor losses occur when a bank’s assets (loans and securities) are of insufficient value to cover its liabilities (insured and uninsured deposits).

        The FDIC is in this case saying it has more losses because it has to cover both insured and uninsured deposits. If the FDIC had to cover only insured deposits (a minority of SVB’s liabilities), then it would sell all the banks assets (securities and loans) and only realize FDIC losses if there is a deficit. When the FDIC also has to cover uninsured deposits (a majority of SVB’s liabilities), then it sells these assets (securities and loans) and realizes FDIC losses if there is a deficit (most likely the case because SVB collapsed).

        So the FDIC is saying its losses are due to its requirement to cover all of SVB’s customers (its insured and uninsured depositors). What I am saying is the asset value deficiency that results in these losses are likely attributable to loans instead of the more common assumption that its is securities.

    2. Objective Ace

      Ultimately time will tell what portion of these taxpayer losses are securities related (a consequence of interest rate risk), and what portion of these losses are loan related

      I dont see any functional difference. Buying the bonds for more than they are worth is the equivalent of lighting whatever the premium was on fire. It makes no difference why the bond is worth less–its the same cost to the taxpayer.. err American citizen since they’re just printing money in this case

    3. tegnost

      Banks take deposits, and use them to make loans or to buy securities.

      Pretty sure that’s at best a very charitable perspective.


      The deposit account is created “out of thin air” as a result of the decision to create the loan, and not the other way around.

      I imagine there are some major garbage barges that got paid at par by Uncle Sugar but they’re hidden under a mountain of similar BS

  8. Mikel

    “On July 16, 2019, The Federal Reserve & FDIC received a letter warning them about issues with U.S. regional banks and their potential failure.

    The letter was sent by a group of senior central bankers and regulators, including Paul Volcker, Sheila Bair, and…”

    Just ran across this. Looking back at 2019, it would appear as though there were already rate cuts to head off a banking crisis…
    Oh, wait, looking back even further there were cuts for the same reason as well.
    Glad they have a solution to the problem. (snark off)

  9. Fred

    Caught a bit of Fox Business News as I was surfing thru the channels, and they were crowing how First Citizens buyout of SVB is how business can solve these problems without help from the government. WTF! are they talking about? Of course no one on the show challenges it.

  10. Telee

    Contrast this bailout with the attention given to the victims of the East Palestine train derailment. Everything for those that have and nothing for others.

  11. David in Friday Harbor


    My pension trust fund, CalPERS, lost 100 percent of their pubic equity and bond holdings in Silicon Valley Bank.

    Thanks Joe! Thanks Janet! Nice to know that Team Blue has my back!

  12. Compendia

    As an experiment, I asked ChatGPT-3 the following question:

    What could be some unintended consequences of the FDIC repaying depositors in excess of the normal $250K limit? Assume that the affected bank had a shortfall of $18B and $13.8B was held in only 10 accounts.

    It’s response was cogent:

    The Federal Deposit Insurance Corporation (FDIC) is an independent U.S. government agency that provides insurance coverage for depositors in case of bank failures. The standard limit of FDIC insurance is $250,000 per depositor, per insured bank. However, if the FDIC were to repay depositors in excess of this limit, there could be several unintended consequences, including:

    (1) Moral hazard: If the FDIC repays depositors in excess of the standard limit, it could create a moral hazard problem where depositors might not be as cautious in choosing banks or monitoring their activities, as they would be less concerned about the safety and soundness of their deposits. This could encourage risky behavior by banks, knowing that the FDIC would cover the deposits, and lead to more bank failures in the future.

    (2) Distortion of competition: Repaying depositors in excess of the standard limit could distort competition among banks, as it would favor larger depositors who can negotiate higher interest rates and other benefits from banks, and thereby discourage smaller depositors from saving their money. This could also encourage banks to pursue riskier strategies to attract large deposits, putting the entire banking system at risk.

    (3) Inequitable distribution of funds: In the case of an $18B shortfall and $13.8B held in only 10 accounts, repaying depositors in excess of the standard limit would lead to an inequitable distribution of funds, as only a few depositors would receive large payouts, while smaller depositors may not receive any payout at all. This could lead to social unrest and political pressure on the FDIC to address the issue.

    (4) Financial burden on taxpayers: If the FDIC has to repay depositors in excess of the standard limit, it would increase the financial burden on taxpayers who ultimately fund the FDIC’s insurance program. This could lead to political backlash and calls for reforming the FDIC’s insurance program.
    In summary, while the FDIC’s insurance program provides depositors with a safety net against bank failures, repaying depositors in excess of the standard limit could have unintended consequences that could undermine the stability of the banking system and create inequities in the distribution of funds.

    I asked GPT-4 the same question and got basically the same answer except for this interesting statement in its preamble:

    It’s essential to note that this scenario is hypothetical, and the FDIC is bound by current regulations.

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