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Experts are warning that US bank customers will face a financial burden from a Biden administration-approved bailout of Silicon Valley Bank — despite assurances from President Biden that taxpayers won’t be responsible for the bill.
In an extraordinary move, the feds announced plans Sunday to use the Federal Deposit Insurance Corp.’s Deposit Insurance Fund (DIF) to cover all deposits at the doomed SVB and another failed firm, Signature Bank in New York, with “no losses” incurred by taxpayers.
President Biden insisted that taxpayers wouldn’t be burdened in his Monday speech on the crisis.
However, if the banking crisis escalates and the DIF’s reserve runs dry, taxpayers would be on the hook for the difference, experts told The Post.
Even if it does not come to that, the FDIC-insured banks that fund the DIF through quarterly payments are likely to pass along their costs to customers.
“The Deposit Insurance Fund is not really an insurance fund,” William Luther, director of the American Institute for Economic Research’s Sound Money Project, told The Post. “It is a rainy-day fund, which gets drawn down following a bank failure and replenished thereafter.”
“Although the statutory incidence of these taxes falls on banks, they pass along some of the cost to their customers in the form of higher fees and lower-quality services,” Luther added.
Aside from outright fees, embattled banks could pass along their costs in ways that are “harder to see” but would still impact customers, such as reducing their number of tellers in local branches to cut down on costs, Luther added.
