After Silicon Valley Bank careened off a cliff last week, jittery venture capitalists and tech startup leaders pleaded with the Biden administration for help, but they made one point clear: "We are not asking for a bank bailout," more than 5,000 tech CEOs and founders begged.
On the same day the U.S. government announced extraordinary steps to prop up billions of dollars of the bank's deposits, Treasury Secretary Janet Yellen and President Biden hammered the same talking point: Nobody is being bailed out.
"This was not a bailout," billionaire hedge-fund mogul Bill Ackman tweeted Sunday, after spending the weekend forecasting economic calamity if the government did not step in.
Yet according to experts who specialize in government bank bailouts, the actions of the federal government this weekend to shore up Silicon Valley Bank's depositors are nothing if not a bailout.
"If your definition is government intervention to prevent private losses, then this is certainly a bailout," said Neil Barofsky, who oversaw the Troubled Asset Relief Program, the far-reaching bailout that saved the banking industry during the 2008 financial crisis.
Under the plan announced by federal regulators, $175 billion in deposits will be backstopped by the federal government.
Officials are doing this by waiving a federal deposit insurance cap of $250,000 and reaching deeper into the insurance fund that is paid for by banks.
At the same time, federal officials are attempting to auction off some $200 billion in assets Silicon Valley Bank holds. Any deposit support that does not come from the insurance fund, or asset auctions, will rely on special assessments on banks, or essentially a tax that mostly larger banks will bear the brunt of, according to officials with the Federal Deposit Insurance Corp.
Which is to say, the lifeline to Silicon Valley depositors will not use public taxpayer money. And stockholders and executives are not being saved. But do those two facts alone mean it is not a bailout?
"What they mean when they say this isn't a bailout, is it's not a bailout for management," said Richard Squire, a professor at Fordham University's School of Law and an expert on bank bailouts. "The venture capital firms and the startups are being bailed out. There is no doubt about that."
Squire said that when top White House officials avoid the b-word, they are "trying to not be brushed with the tar of the 2008 financial crisis," when U.S. officials learned that sweeping bailouts of bankers is politically unpopular. The White House does not want to be associated with "the connotation of rescuing fat cats, rescuing bankers," he said.
"If we use a different term, we're serving the interest of those who want to obscure what is really happening here," Squire said.
Amiyatosh Purnanandam, a corporate economist at the University of Michigan who studies bank bailouts, put it this way: "If it looks like a duck, then probably it is a duck," he said. "This is absolutely a bailout, plain and simple."
Purnanandam, who has conducted studies for the FDIC on the insurance fees banks are charged, said when a single bank's depositors are fully supported by insurance and bank fees, the cost will be eventually shouldered by customers across the whole U.S. banking system.
"When we make all the depositors whole, it's akin to saying that only one person in the family bought auto insurance and the insurance company is going to pay for everyone's accident," he said. "In the long run, that's a subsidy because we are paying for more than what we had insured."
Still, many with ties to tech and venture capital are trying to resist saying "bailout" and "Silicon Valley Bank" in the same sentence.
Scott Galloway, a professor of marketing at New York University, tweeted that "we need a new word" to describe when shareholders and investors are wiped out but bank depositors are made whole.
Fordham banking expert Squire is not so sure the English language needs to invent new words.
"A bailout just means a rescue," Squire said.
"Like if you pay a bond for someone to get out of jail, rescuing someone when they're in trouble," he said. "If you don't want to use the b-word, that is fine, but that is what is happening here."
