On Monday, Vice President Joe Biden reassured the public that the American financial system is secure, outlining the steps the government is taking to prevent the collapse of Silicon Valley Bank. “Americans can rest assured that our banking system is safe. Your deposits are safe,” Biden reassured depositors in the Roosevelt Room.
Biden used his address, which was just released late Sunday night, to calm nerves by describing in detail what he has asked his administration to do to safeguard small businesses and employees in the aftermath of the recent shutdowns of Silicon Valley Bank and Signature Bank by regulators.
The government has taken measures like protecting depositors’ money, making sure taxpayers are not on the line for these activities, holding the culpable parties accountable, and denying relief to Silicon Valley Bank’s investors. The president has informed the public that those who have been impacted would have access to their funds on Monday.
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“Management of these banks will be fired. If the bank is taken over by FDIC, the people running the bank should not work there anymore,”
Biden said, adding that investors in the banks will “not be protected” because they knowingly took a risk. The president added that there must be an investigation into what went wrong so that it “never occurs again.”
Biden vowed that “In my administration … no one is above the law,” and he urged lawmakers to reinstate banking restrictions that had been weakened under Trump.
Speed Matters in Moments Like This
Last Thursday, depositors pulled $42 billion out of Silicon Valley Bank in a classic bank run brought on by the chaos caused by rising interest rates. About half of all technology and healthcare startups in the United States that received venture capital funding received funding from SVB.
The bank reported $151.5 billion in uninsured deposits at the end of 2022, of which $137.6 billion was held by customers in the United States. Although though it is not widely known outside of Silicon Valley, this bank was among the top 20 American commercial banks as of December 31, 2018, with a total of $209.0 billion in assets.
Biden emphasizes US banking system is safe after Silicon Valley Bank collapsehttps://t.co/0QDxWf3V0v
— 7News Boston WHDH (@7News) March 13, 2023
Since the fall of Washington Mutual in 2008, this is the largest financial institution to fail. Analysts said it was unlikely that the collapse of Silicon Valley Bank would trigger the kind of domino effect that seized the banking industry during the 2008 financial crisis, despite initial alarm on Wall Street over the run on the bank, which led its shares to drop.
The failure of SVB left top administration officials frightened and on high alert for additional risk as they entered the weekend. Yet, they continued to express confidence in the US banking system as a whole. While this view hasn’t changed, officials say it became increasingly apparent over the course of 36 hours that the system was facing the possibility of broad spreading, driven mostly by fear and uncertainty.
Biden, who spent the weekend at his home in Delaware, had daily updates from Lael Brainard, director of the National Economic Council. In discussions with Vice President Biden, Treasury Secretary Janet Yellen reportedly delivered the comprehensive plan as regulators proceeded toward the solution they would deploy. The plans were approved by the president.
We need drastic, far-reaching action, with two parts: one to deal with the immediate crisis, the other to prevent any lingering repercussions. The US government would guarantee all of the bank’s uninsured deposits. According to two sources with knowledge of the situation, authorities were also keeping an eye on several other, comparable institutions that were at the point of collapse.
If there were to be a shortage of cash, the Federal Reserve would open a lending facility. A senior administration official stated, “Speed matters in circumstances like this,” referring to the sudden shift toward extreme emergency operations. It’s hoped that“These actions should help prevent any additional contagion.”
At the outset of the weekend, the administration’s primary focus was on facilitating the purchase of Silicon Valley Bank’s assets and overseeing a clean transfer of ownership that safeguarded tens of billions of dollars in uninsured deposits. But, federal authorities claimed that private sector solutions were slow to emerge in a way that they believed effectively addressed the issue.
