During an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers stated that the amount the FDIC spent on bank resolutions is “stunningly” high and that taxpayers will ultimately bear the cost.
Summers stated, “I’m surprised by how much the FDIC has had to spend on these resolutions relative to the things that were being said earlier. They were hoping to sell SVB as a whole entity and then, in order to get somebody to buy it, they had to chip in a set of stuff that was cumulatively worth $20 billion. The arithmetic is similar relative to the scale of the bank at Signature Bank. There are a lot of questions about those transactions. I’m still confused about why the holding company debt of SVB is still being valued in a meaningful way. And I will want to see assurance that no executive there is getting deferred compensation. But these were stunningly expensive transactions. Ultimately, everybody’s going to say, it’s not coming back to taxpayers, but banks are taxpayers on behalf of people, their depositors, their customers, their people they lend to. And the $23 billion the FDIC has spent is $100 per adult American and that’s a fair amount. So, I wonder if we can’t be looking at the procedures that they’re using and finding ways to do better.”
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