FDIC defeats $1.71B claim over Silicon Valley Bank collapse

The FDIC just caught a major break in the long, messy aftermath of Silicon Valley Bank’s implosion. US District Court Judge Beth Labson Freeman ruled that the deposit insurer, acting as SVB’s receiver, bears no liability for a $1.71 billion claim brought by SVB Financial Trust, the bank’s parent entity. The decision came after a 12-day non-jury trial and effectively removes a significant potential drain on the Deposit Insurance Fund, the pool of money that backstops American bank deposits. What the judge actually decided Judge Freeman’s reasoning centered on the people who steered SVB into the iceberg, not the institution left holding the pieces. The bank’s executive officers had piled heavily into long-term government bonds and mortgage-backed securities, a strategy that looked prudent in a low-rate environment and catastrophic once the Federal Reserve started hiking aggressively. Critically, the court found that these investment decisions did not qualify for protection under the business judgment rule. That legal doctrine typically shields corporate officers from liability for good-faith decisions that happen to turn out badly. Judge Freeman concluded the executives’ conduct fell...