Skip to main content
SearchLoginLogin or Signup

Tied Together with Covenants: Tying Provisions as the Anti-Hero to FDIC Insurance Limits

Published onJan 21, 2025
Tied Together with Covenants: Tying Provisions as the Anti-Hero to FDIC Insurance Limits

Kelly W. Cline, Tied Together with Covenants: Tying Provisions as the Anti-Hero to FDIC Insurance Limits, 25 Wake Forest J. Bus. & Intell. Prop. L. 131 (2025).

On March 10, 2023, the financial industry had a painful flashback. Silicon Valley Bank (“SVB”) failed—a U.S. bank failure second only to the failure of Washington Mutual Bank in 2008. Soon after SVB’s collapse, Signature Bank in New York followed, taking the bronze as the third largest bank failure in U.S. history. At the time of the two consecutive failures, many individuals in the industry were too young and carefree to remember what the rumblings that signaled the Great  Recession were like in 2008. Mid-level associates in banks and law firms alike looked to their elders in the industry and asked: “What happens now?” Such a broad inquiry involves a two-part concern. 

First, there was the issue of customers, i.e., SVB and Signature Bank depositors. As the name suggests, the Federal Deposit Insurance  Corporation (“FDIC”) provides insurance for depositors of member banks, and fortunately, SVB and Signature Bank were among the FDIC’s many members. Insurance, however, does not necessarily mean the absence of cost or loss, just the diminishment of such cost or loss, a fact every individual who has darkened the door of a doctor’s office can attest to. Given the FDIC insurance limits at the time SVB and Signature Bank failed (and the publication of this Article), depositors with over $250,000 deposited could lose money if the government did not intervene.

…..

Comments
0
comment
No comments here
Why not start the discussion?