Washington, D.C. — Amid reports that officials at the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation are considering bailing out Silicon Valley Bank (SVB) depositors if the FDIC is unable to sell SVB to another, healthy financial institution, the American Economic Liberties Project’s Research Director, Matt Stoller, issued the following statement.

“Silicon Valley Bank was a badly managed and corrupt institution that entangled itself with powerful actors in the technology industry. The operative question government regulators are now facing is whether to use taxpayer funds to bail out the depositors from the failures of SVB’s management.

“Economic Liberties believes there is no need to bail out the bank or the uninsured depositors due to SVB’s unnecessary risk-taking and self-dealing, as well as the wealthy venture capitalists who were complicit. A full bailout will only encourage other large regional banks to take similar risks in the future, just as Silicon Valley Bank did.

“Without clear evidence that there is contagion, there are no legal grounds for a systematic risk determination for SVB. SVB is a uniquely unhedged and badly run institution; most other banks have higher capital levels and more insured deposits.

“The current FDIC strategy of liquidating the bank is the right path. Uninsured depositors will therefore get substantial amounts of their deposits back soon. Larger banks will determine if they want to purchase SVB.

“There is a reasonable concern that, going forward, businesses will seek to bank with the largest banks that have an implicit government backstop. In our view, the lesson of this crisis is that regional banks need to have more competent risk-aversion strategies. There are many products — such as cash sweeps — that allow firms to keep large amounts of cash on hand that are insured by the FDIC at small and regional banks. SVB failed to take this path. And as a result, they should suffer the consequences of their risk-taking.

“Congress also has an important role to play here. It should immediately investigate Silicon Valley Bank leaders, as well as the Federal Reserve’s poor supervisory and regulatory choices. Furthermore, it is long last time to pass legislation to break up the largest banks. And finally, Congress should pass legislation to provide Federal Reserve accounts for any business or institution that wants safe keeping of its money.”