Regulators auctioning Silicon Valley Bank in effort to contain fallout: reports

Federal officials are auctioning off Silicon Valley Bank, according to multiple reports Sunday, as they try to contain the fallout of the bank’s historic failure last week.

Regulators started the auction on Saturday and expected bids by 2 p.m. on Sunday, according to the New York Times and the Wall Street Journal, which cited people familiar with the matter who spoke on the condition of anonymity.

Bloomberg reported that a winner could be known by later Sunday.

The Federal Deposit Insurance Corporation (FDIC) took over the bank last week after depositors rushed to pull their cash from the firm. The collapse sent shockwaves through the tech world, which relied heavily on the bank for financing.

But the fall of the bank also saw shares in other major banks dip before markets closed at the end of last week, leaving officials scrambling to find a solution before Asian markets opened later Sunday and the U.S. market opened Monday. 

While the FDIC only insures deposits of up to $250,000, federal regulators are considering taking the unprecedented step of backstopping all deposits in the bank, as they fear a domino effect through the rest of the banking system, according to the Washington Post.

Lawmakers on Sunday pushed the FDIC and federal regulators to find an outside buyer for the firm, and opposed a full-on bailout.

Officials fear that the collapse of Silicon Valley Bank may prompt depositors to move their money from similar medium-sized banks and consolidate funding into large Wall Street institutions.

Federal banking law would allow the government to protect uninsured deposits if it is deemed that failure to do so would pose a systematic risk to the U.S. banking infrastructure, using money from a federal insurance fund that is paid into regularly by U.S. banks. 

The move must be agreed to though by a two-thirds vote of the Federal Reserve’s Board of Governors and by Treasury Secretary Janet Yellen.