March 14 (Reuters) - The Federal Deposit Insurance Corp
made a record withdrawal of $40 billion on Friday as it
scrambled for resources to take over failing Silicon Valley Bank
that same day, government data shows, a development that could
have implications for how soon the Treasury runs out of
operating room under the debt ceiling.
The FDIC withdrawal from the Treasury General Account was
many times larger than any previous largest draws, according to
data from the Daily Treasury Statement for March 10 released
late on Monday.
Combined with about $13 billion of other federal agency
withdrawals on Friday, that left Treasury with just over $208
billion in operating funds at the TGA, which is held at the
Federal Reserve. That was down by more than $100 billion from
Wednesday's TGA balance, reported by the Fed on Thursday.
"The big news ... was a $40 billion cash withdrawal by the
FDIC, which dragged the Treasury’s cash balance far below our
day-ahead forecast," analysts at Wrightson ICAP said Tuesday.
Should the Treasury not be able to replace that, the
"outflow would significantly increase the risk that the 'X-date'
might arrive in June rather than July," they said.
The so-called "X-date" is the point at which the Treasury
exhausts the "extraordinary measures" it has been taking
recently to keep paying federal government obligations while
Congress and the White House wrangle over whether to lift the
$31.4 trillion limit on the U.S. debt.
The FDIC withdrawal came the same day as Treasury Secretary
Janet Yellen warned members of the Republican-controlled House
of Representatives that a failure to lift the ceiling that
results in a U.S. default would cause "economic and financial
collapse." Republican House members are insisting on large
budget cuts and other concessions before agreeing to lift the
limit.
Shortly after delivering that warning, Silicon Valley was
taken over by the FDIC, and Yellen, alongside officials at the
Fed, FDIC and other bank regulators, spent the weekend arranging
emergency measures to prevent the failure of the No. 16 U.S.
bank from triggering a wider financial crisis.
Wrightson's analysts said there remains enormous uncertainty
around when the X-date will arrive.
"Our basic debt ceiling outlook has not yet changed in light
of Friday’s unprecedented FDIC outlay, but it could shift by the
end of the week as more details become available," they said.
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WRAPUP 8-U.S. banks shake off immediate SVB contagion fears Apollo, Blackstone and KKR eye SVB loan book - Bloomberg News U.S. Justice Department, SEC investigating Silicon Valley Bank
collapse - WSJ U.S. Senator Warren: Fed's Powell should recuse himself from
bank review SVB a casualty in 'battle between fire and ice' against
inflation, bankers hear First Republic shares dive on contagion fear, dragging U.S.
regional banks ANALYSIS-Some U.S. banks facing stock rout may need to seek
partners ANALYSIS-Declining U.S. bank reserves add wrinkle to contentious
debt ceiling issue ANALYSIS-SVB collapse unleashes Treasury volatility, whiplashing
investors BREAKINGVIEWS-Bank woes make winners of money market villains BREAKINGVIEWS-Startup CEOs learn a lesson in counterparty risk GRAPHIC-SVB, Signature Bank are first bank failures since 2020 GRAPHIC-The path to the fall of Silicon Valley Bank ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting By Dan Burns, Editing by Nick Zieminski)
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