The U.S. government swooped in to save Silicon Valley Bank depositors on Monday, guaranteeing uninsured deposits over $250,000 would be accessible to customers of the collapsed bank and those of Signature Bank, but they refuse to call it a ‘bail out.’

Bank shares bounced back on Tuesday following the news, after taking a hit triggered by the heavy selling of investors anxious about the impact higher interest rates may be having on lenders.

The Federal Reserve and the FDIC voted unanimously that a systemic risk existed in the fallout of the SVB collapse, which was shut down by regulators on Friday, March 10. 

The U.S. Treasury and Federal Reserve announced all SVB and Signature Bank depositors would have full access to all funds, insured and uninsured, as of Monday, March 13.

SVB had close to $150 billion in uninsured deposits.Signature Bank had over $70 billion in uninsured deposits.

The U.S. government can guarantee all deposits from the two banks by drawing from a fund paid into by U.S. banks and the Treasury Department. Treasury Secretary Janet Yellen says the Treasury’s Exchange Stabilization Fund has $100 billion in it.

$25 billion from the fund will go into a special program, where banks that use their assets as collateral can receive a loan from the Federal Reserve, even if the value of the assets has diminished since purchase.

The U.S. Department of Justice and the Securities and Exchange Commission has opened an investigation into SVB, sources say.Some economists are predicting the U.S. central bank will halt its projected quarter point interest hike next week to further boost confidence in the U.S. banking system. 

U.S. government officials are not calling the move to protect depositors a ‘bailout,’ despite having privileged information about potential global effects of SVB’s closure.

Using U.S. government money to reimburse SVB and Signature depositors appears to be intended to stoke consumer confidence in the U.S. banking system, and prevent a ‘bank run.’

The move will also give the U.S. government time to analyze the reasons for SVB’s collapse, and enact any necessary reforms.

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