This post originally appeared on The Basis Point: Goldman Sachs Predicts March 22 Fed Hike Off The Table

Goldman Sachs said in a Sunday, March 12 research note that a March 22 rate hike by the Fed may be off the table. The note came after the Fed and Treasury’s protection for Silicon Valley Bank depositors and liquidity for banks. It also includes details on how the programs work. Below key excerpts from Goldman (with emphasis in bold from me), and links to the Fed and Treasury programs.

– The FDIC has used the ‘systemic risk exception’ (SRE) to protect uninsured depositors in two bank resolutions, Silicon Valley Bank and Signature Bank. In both cases, the costs not covered by the banks’ assets would be funded out of the FDIC’s Deposit Insurance Fund (DIF), which had a $125bn balance as of Q4 2022. The SRE waives the requirement that FDIC resolution uses the method that is least costly to the DIF. This option is available to the FDIC if resolving a bank in the least costly method would have “serious adverse effects on economic conditions or financial stability”. The FDIC’s decision to make this designation should reduce the perceived risk of holding uninsured deposits in other institutions and is likely to be helpful in reducing deposit outflows. An open question is whether the FDIC would continue to address other institutions in the same manner if they are of smaller size than the two banks in question.