FDIC Chair Martin Gruenberg, source - Bloomberg.
The United Kingdom Branch of Silicon Valley Bank was scooped up by HSBC, Britain's biggest bank, within a couple of day's after SVB's failure. A week later, and the American regional bank still does not have a buyer. Why?
Reports have now emerged that President Biden's FDIC chair kept the nation's "big four" banks from bidding in the first auction round, which concluded Sunday March 12th. The reason? Lizz Hoffman of Semafour reports that FDIC Martin Gruenberg has it out for the "bigness" of the nation's largest commercial banks.
"People don’t like them, and in particular, the chairman of the FDIC [Martin Gruenberg] really doesn’t like them and doesn’t want them getting bigger. And he’s talked about that a lot in the last couple of years. So it was a political calculus that this was the moment to sort of take a stand on this issue."
In other words, the FDIC chair was in a position to enable a large bank to scoop up SVB's business units, and quite possibly honor its uninsured deposits, leaving the FDIC fund intact. Instead, the FDIC kept the larger banks from bidding and put the uninsured deposits on the Federal Deposit Fund's tab. On that critical weekend, politics won.
The optics of a global money center bank, like JP Morgan or Wells Fargo, buying up a regional, are not politically good. However, with SVB's failure, none of the options on the table were going to be "good". Facilitating a sale to one of the big banks would've been a better deal for the taxpayer, but that option wasn't chosen, because of the Biden Administration's general superstition towards large firms.