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For days, lawmakers, bankers and everyone else in the financial world have speculated why there was no deal over the weekend for another institution to buy the failed Silicon Valley Bank. Now, we have the answer: There was never going to be a deal over the weekend.

A person familiar with the FDIC’s thinking said the issue was a legal requirement for the agency to pursue the option that would cost the deposit insurance fund the least. Because there were so few insured deposits, the FDIC could just liquidate the bank and still not lose any money, according to the person, who was granted anonymity because of the sensitivity of the situation. So when banks tried to figure out what kind of loss-sharing arrangements might be on the table, the agency — legally — had to say: none.

Now that the FDIC, with approval from the Federal Reserve and Treasury, has invoked the so-called “systemic risk exception” to that requirement, the FDIC has more flexibility to negotiate with a buyer.

For those of you who noticed that the FDIC initially created a “deposit insurance national bank” for SVB, holding only its insured deposits, rather than a “bridge bank” holding all of its assets, this is why, the person said. A deposit insurance national bank is generally for when the FDIC expects to liquidate the bank, rather than sell it. Now, the agency has made a bridge bank for SVB.

There’s been a lot of speculation as to whether FDIC Chair Marty Gruenberg would accept one of the country’s megabanks as buyer, given his distaste for overconcentration. Your MM host doesn’t have any particular insight to provide on that front. But, this helps explain some of the lack of urgency about a sale that many people sensed over the weekend.

Our Sam Sutton reported that the FDIC declined bids submitted in the auction held over the weekend, citing four lawmakers who have been briefed on the matter, a decision that frustrated some Congress members who would’ve preferred to see SVB acquired. Major financial institutions – i.e. global systemically important banks – were waved off by regulators who may have been reluctant to transfer SVB’s holdings to a global behemoth, according to two industry sources who were also granted anonymity to discuss the highly fluid sales process.

Now, the agency has hired investment bank Piper Sandler to help sell the failed lender, Sam reported on Wednesday. One lawmaker who attended a briefing with regulators on Monday told Sam the FDIC is aiming to find a buyer this week.

As an aside, there are additional reasons why a deal seems more likely now than over the weekend. From a banker’s perspective, deposits were fleeing en masse on Thursday and more were waiting in the queue to leave on Monday. Before the sweeping action taken by the Fed and the FDIC, it wasn’t clear which customers would be left. Now there’s a bit more clarity — and they’ve had a bit more time to check out the books.

IT’S THURSDAY — Zach is flying solo next week while Sam is off. Have tips, gossip or scoops? Hit Zach at [email protected] and Sam at [email protected].

Housing starts, jobless claims and manufacturing data will be released at 8:30 a.m. … Treasury Secretary Janet Yellen will testify in front of the Senate Finance Committee at 10 a.m. … The Senate Banking Committee has a hearing on public transportation at 10 a.m. … The SEC has a closed meeting at 2 p.m. … Rep. French Hill (R-Ark.) will speak on a Global Blockchain Business Council and University of Arkansas School of Law webinar at 2 p.m.

First in MM: Whitehouse hits Treasury on shell company rules — Senate Budget Chair Sheldon Whitehouse led a bipartisan letter dinging the Treasury Department’s Financial Crimes Enforcement Network for flubbing draft rules designed to shed light on the ownership of anonymous shell corporations. The proposed rules, the product of a 2021 anti-money laundering law shepherded by the Rhode Island Democrat, create unnecessary impediments for banks — as well as state, local and tribal law enforcement — seeking to access company ownership information in a planned government directory, according to the letter. The other signatories are Sens. Chuck Grassley (R-Iowa), Sen. Marco Rubio (R-Fla.), Elizabeth Warren and Ron Wyden (D-Ore.).

OF COURSE THERE’S AN ESG FIGHT OVER SVB — From Sam: “Top Republicans have zeroed in on the failed bank’s stances on sustainability and diversity as proof that its management team cared more about promoting a progressive agenda than safeguarding the more than $150 billion its customers had placed in uninsured deposits … Florida Gov. Ron DeSantis over the weekend battered Silicon Valley Bank leaders for being too focused on so-called ‘woke’ initiatives to defuse the time bombs on its balance sheet.”

“Which specific DEI efforts is Gov. DeSantis referring to?” Aniela Unguresan, founder of the EDGE Certified Foundation — a group that offers corporate certification on diversity and equity standards — told Sam. “Rigor, discipline and objective evidence — preferably not Fox News endorsed — do matter.”

WE’RE ON REDDIT – Your MM hosts joined Steven Kelly, Senior Research Associate at the Program on Financial Stability at Yale University and noted “I Think You Should Leave” fan, for a Reddit AMA on the SVB debacle. Come for Victoria and Steven’s thorough explanation of bank regs, stay for Sam’s half sentences.

“No Landing” could become “Thelma & Louise” landing — As recently as last month, Apollo Global Management chief economist Torsten Slok saw signs that the U.S. economy would accelerate despite aggressive rate hikes overseen by Fed Chair Jerome Powell. Funny what a regional banking crisis can do to an economy.

“Last week, I would have told you that the Fed will likely hike rates 50 basis points” at its March 21-22 meeting, Slok told Sam early Wednesday morning. Despite fresh consumer price index data showing persistent inflation, “there is now a risk where financial stability is becoming an issue. [That] complicates matters because it’s so difficult to quantify what that means in terms of the economic outlook.”

With credit conditions likely to tighten as banks reorganize their balance sheets, Slok said he doesn’t see the Fed raising rates next week. They could resume the hike if stability risks abate in the coming weeks, he added.

A lot happened between Sam’s conversation with Slok and close of business.

— First Republic, another regional bank and an important banking partner for private equity and venture firms, was downgraded by Fitch Ratings amid liquidity and funding issues.

— Treasury officials are reviewing the U.S. financial sector’s potential exposure, per Bloomberg’s Saleha Mohsin and Viktoria Dendrinou.

— And “markets for the world’s safest and most liquid assets … came under immense stress on Wednesday following a week of worries about the health of global banks,” according to The WSJ’s Gunjan Banerji, Anna Hirtenstein and Eric Wallerstein:

— Reuters’s David Carnevali: “U.S. stocks pared losses late on Wednesday but the Dow and S&P 500 still closed lower, as problems at Credit Suisse revived fears of a banking crisis, eclipsing bets on a smaller U.S. rate hike this month.”

— Finally, late Wednesday, The WSJ reported that"Credit Suisse ... would exercise its option to raise as much as 50 billion Swiss francs, equivalent to $53.7 billion, from the Swiss National Bank in a bid to stanch liquidity concerns.”

FedNow will be here later this year — The Federal Reserve on Wednesday announced that FedNow, its new system for near-instant payments, will start operating in July. The launch will “enable every participating financial institution, the smallest to the largest and from all corners of the country, to offer a modern instant payment solution,” Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive,said in a statement.

— Brookings Institution senior fellow Aaron Klein has an op-ed calling on Congress to “fundamentally re-think the role of the central bank” as it relates to supervision in the aftermath of SVB.

OUR MAN IN BOCA — Our Declan Harty from the Futures Industry Association annual conference: “CFTC Chairman Rostin Behnam has a message for lawmakers on the future of cryptocurrency legislation: ‘Anything is better than nothing.’”

CYBER — More from Declan: “In a bid to buttress the financial markets from the growing threat of cyberattacks, the SEC on Wednesday proposed rule changes that would impose stricter technological requirements on broker-dealers, investment companies and stock exchanges.”

And ICYMI — Also from Declan: “America’s biggest banking blowup since the 2008 financial crisis is causing new headaches for crypto executives.”

THE EUROPEAN VIEW ON SVB — Our Bjarke Smith-Meyer reports that Mairead McGuinness, the European Commission’s finance chief, thinks that “regulatory rollbacks in the U.S. on cash buffers for mid-size lenders under Donald Trump’s administration left the likes of Silicon Valley Bank and Signature Bank vulnerable to collapse.”

What’s Larry thinking? — BlackRock Chairman and CEO Larry Fink says inflation is likely to stay close to 3.5 or 4 percent over the next few years — well above the Fed’s 2 percent target. Just as importantly, some investors might run into problems if they used leverage to buy up illiquid assets – i.e. investments that are harder to unload than stocks or bonds. That could be the “third domino to fall” as the U.S. faces an uncertain economy, Fink wrote in his annual letter.

— Healthy Markets Association has put out a report to break down the regional banking crisis. The key takeaway? It “doesn’t look anything like 2008 to us – yet.”

IT’S ALMOST AS IF IT’S NOT A MONOLITH — Bloomberg’s Sarah McBride and Olivia Solon: “Silicon Valley Bank’s collapse laid bare divisions in the usually clubby venture capital community, with some investors blaming their counterparts for igniting a panic that brought down a beloved startup business partner.”