Is this a bailout?

The whisper of the word “bailout” is enough to send a shiver down anyone’s spine. For most, it evokes specific and evocative memories of the 2008 global financial crisis, when the United States government stepped in to keep flailing financial institutions afloat using taxpayer money. In the popular imagination, it persists as an example of capitalistic governance at its worst: The big banks took big risks, and everybody else paid for it.

Now, in the wake of Silicon Valley Bank’s implosion and the government’s announcement that it will step in to return money to depositors and shore up the US banking system once again, the term bailout is here once again. But is that what’s really happening here? The long and short of it is that it’s complicated, but basically, kind of yes, though this isn’t a 2008 redux.

To back up a little bit in case you’re not up to speed, over the past several days, a handful of US banks have been in disarray. (You could check out Vox’s answers to nine questions you might have about the debacle here.) Silicon Valley Bank, or SVB, a bank that largely catered to the tech sector, startups, and venture capital, went under last week. The bank announced it was in the midst of a cash crunch on Wednesday, March 8, and by Friday, March 10, regulators shuttered it and the FDIC took it over.

Heading into the weekend, there was a bunch of speculation about what would happen with SVB specifically. It had a lot of important clients (including Vox Media, which owns Vox.com), and while many depositors were able to pull their money out before it collapsed, not everyone could. There were concerns companies wouldn’t, for example, be able to make payroll with their funds caught up in SVB.

On Sunday, March 12, the Treasury Department, the Federal Reserve, and the FDIC announced that they were taking “decisive actions” to protect the economy and shore up confidence in the banking system. They said they would make sure all of SVB’s depositors would have access to their funds by the next day, not just the $250,000 guaranteed by the FDIC. Also on Sunday, New York regulators shut down Signature Bank, which had gotten into crypto, and the federal government said its depositors’ funds would be guaranteed as well. The Fed said it was also going to open up a facility to make funding available for other financial institutions in the form of one-year loans to try to limit contagion across the banking sector and to stave off other bank runs, like what happened with SVB. Essentially, the Fed wants to boost confidence so people don’t panic and try to withdraw all their money all at once.

The White House has been emphatic in its emphasis that this isn’t a 2008 situation. SVB and Signature aren’t going to be revived, and their lenders and shareholders aren’t getting any government money. The money for depositors will come from a fund that banks pay into, the Deposit Insurance Fund, and not from taxpayers. (Treasury could have to backstop the FDIC fund or the Fed’s loan program funds, but it’s quite unlikely.)

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out,” Treasury Secretary Janet Yellen said in an interview with Face the Nation on Sunday. “The reforms that have been put in place mean that we’re not going to do that again, but we are concerned about depositors and are focused on trying to meet their needs.”

There is no official conceptual meaning or legal definition for a bailout, but this isn’t a bailout in the way we thought about them after the global financial crisis, said Josh Lipsky, senior director of the GeoEconomics Center at the Atlantic Council. “It’s not Congress approving, it’s not taxpayer funding. It’s money given to secure a financial institution from the federal government, but the money is collected from other banks,” he said. “From a political consciousness of how we got used to the word [bailout] over the past decade, it’s not.”

Still, it is the government stepping in to shore up the banking system and, in the case of SVB and Signature, their depositors. The pair of banks in question got in over their heads, and now the money has to come from elsewhere to pay back the people and entities keeping their money there. There are concerns other regional banks could be in trouble, too, and, presumably, if one of them goes under, similar mechanisms would be used to back up their depositors, too.

Some say it’s a bailout no matter how you slice it. When I emailed Aaron Klein, a senior economics fellow at the think tank Brookings Institution, to ask whether he thought what had happened counted as a bailout, he replied, “BAILOUT all caps level.” Megan Greene, Kroll’s global chief economist, drew the distinction from 2008. “It’s a bailout, but it’s a bailout of a different group and it’s done in a different way.”

Bloomberg’s Matt Levine wrote in a column on Monday that one way to read the Fed’s loan offer and guarantees on uninsured deposits is as developments that “do in some obvious sense amount to a bailout of banks” (even if not SVB, which has already gone under). “If you are an uninsured depositor at a medium-sized bank that made some dumb rates bets, there is no reason to move your money now; the Fed has made it clear that it will support that bank,” he wrote.

Some observers have noted that some of the depositors presumably being backed up among SVB’s clientele are well-off, risk-taking venture capitalists and tech leaders. In popular culture, they’re not exactly the most sympathetic crowd. “It is a bailout. Not like 2008. But it is a bailout of the venture capital community [and] their portfolio companies (their investments). That’s the depositor base of SVB,” said New York Times columnist Andrew Ross Sorkin in a tweet. It’s the “right thing to do in the moment,” he added, but there will be ramifications and likely new regulations.

Mike Konczal, director of macroeconomic analysis at the Roosevelt Institute, a progressive think tank, emphasized the regulatory point, noting that the Trump administration and a bipartisan group in Congress loosened regulations around the banking industry in 2018. “This is a bad outcome. We didn’t want this to happen. We need our regulations to do better, and if we can’t do it through the regulations we have, we need new ones, because we don’t want to be doing this,” he said. “Here, the FDIC used emergency powers that it has access to, but we don’t want them using the power so regularly.”

It would be really neat to have a clear-cut answer here on whether the government’s announcements on Sunday amount to a bailout, but really, the answer depends on who you ask. It also depends on whether you think this is a moral hazard risk, meaning it could result in more banks behaving badly. In the zeitgeist, the term “bailout” has all sorts of historical (and largely negative) connotations that poison the well around the entire conversation.

The fact of the matter is, on Friday, a lot of businesses went into the weekend wondering how they were going to run their operations on Monday, and plenty of workers wondered if they were going to get paid in the next cycle. The federal government has stepped in with some backstops, for SVB and Signature’s depositors and for the banking industry overall. It’s not clear which banks, if any, will even try to get the Fed’s assistance — a lot of the time, the Fed just saying it will step in is enough to do the trick.

As unsatisfactory as it is, the response to whether this amounts to a bailout is yes-ish, and we’ll see what happens next.