First Citizens to Buy Much of Silicon Valley Bank

Facts

• The Federal Deposit Insurance Corporation (FDIC) on Sunday announced that First Citizens Bank & Trust Co. ("First Citizens") has agreed to purchase the deposits and loans of the failed Silicon Valley Bank (SVB).¹
• First Citizens will buy SVB's Silicon Valley Bridge Bank branch for about $72B, including its National Association's assets for a discounted price of $16.5B. SVB's 17 branches are set to reopen on Monday as new branches of First Citizens.²
• After failing in its first attempt to auction off bits of SVB, the FDIC moved to allow bidders to submit separate offers for the bank and its subsidiary. Even with First Citizens' purchase, approximately $90B in securities and other assets await disposition.³
• As a part of the purchase agreement, the FDIC agreed to a "loss-share transaction," and will absorb a portion of the losses on the acquisition. The clause is "projected to maximize recoveries...by keeping them in the private sector" and "minimize disruptions for loan customers."⁴
• Many have been stunned by First Citizens' acquisition, though the bank has a history of bailing out troubled competitors. Since 2009, the country's 30th-largest bank has acquired at least 20 FDIC-assisted institutions.³
• In light of the transaction, in which "the FDIC received equity appreciation rights in First Citizens BancShares," First Citizens' stock soared 45% during Monday morning trading.⁴

Sources: ¹FOX News, ²ABC News, ³Bloomberg, and ⁴CNBC.

Narratives

• Narrative A, as provided by Vox. While this acquisition may not seem like one in the traditional sense, it's still a bailout. These banking institutions got in over their heads and collapsed. The customers of those banks are still getting their money from somewhere, which is partly at the expense of taxpayers and partly the finance industry. So while we call it protecting the consumer, it is ultimately a bailout, just disguised by another name.
• Narrative B, as provided by Vanity Fair. There are certainly questions to be answered surrounding how this collapse occurred in the first place, but that doesn't mean the government response is unethical. This is not a bailout, as the FDIC ensured a private entity would pay for it. No federal money is being used other than the highly-praised $250K FDIC insurance policy, so talk about taxpayers bailing out big banks should be nipped in the bud.