Throughout an interview aired on Friday’s version of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the Nationwide Financial Council underneath President Barack Obama, and Treasury Secretary underneath President Invoice Clinton Larry Summers that the quantity the FDIC spent on financial institution resolutions is “stunningly” excessive and that taxpayers will finally bear the fee.
Summers acknowledged, “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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