President Biden Addresses Concerns Over Banking System Safety After Svb Failure

President Biden Addresses Concerns Over Banking System Safety After Svb Failure- On Monday, President Joe Biden explained how his administration prevented Silicon Valley Bank’s collapse.

“Americans can trust our banking system. “Your deposits are safe,” Biden stated from the Roosevelt Room. “We won’t stop here. We’ll do whatever’s needed.”

Biden used his address, announced Sunday night, to calm worries and explain what he has ordered his administration to do to protect small businesses and workers after regulators shut down Silicon Valley Bank and Signature Bank.

The president said impacted clients may “feel certain” they will get their money on Monday.

Bank managers will be dismissed. “If FDIC takes over the bank, the people running the bank should not work there anymore,” Biden stated, adding that investors will “not be protected” because they deliberately took a risk.

President Biden Addresses Concerns Over Banking System Safety After Svb Failure

The president also demanded a “full accounting” of what transpired and measures to prevent it from happening again.

Biden called on Congress to reinstate banking restrictions pulled back by the Trump administration.

SVB financed nearly half of US venture-backed technology and healthcare startups. The bank reported $151.5 billion in uninsured deposits in 2022, $137.6 billion of which were from American depositors.

The FDIC listed the bank among the top 20 American commercial banks with $209 billion in assets at the end of last year, despite its relative obscurity outside Silicon Valley. It’s the most significant loan failure since Washington Mutual in 2008.

Wall Street panicked at Silicon Valley Bank’s run, sending its shares plummeting, but analysts warned the bank’s failure was unlikely to cause a domino effect like the 2008 financial disaster.

SVB’s failure upset top government officials, who spent the weekend on high alert. Yet, they believed in the American banking system’s stability.

During 36 hours, senior officials from the bank regulators, Treasury Department, and White House became increasingly concerned about widespread contagion, fueled by fear and uncertainty.

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National Economic Council Director Lael Brainard briefed Biden during the weekend at his Delaware residence. Officials claimed that Treasury Secretary Janet Yellen submitted the idea to Biden as regulators approached their solution.

The approach would be forceful and sweeping, with two components to handle the near-term problem and eliminate any long-term spillover consequences.

The US government guarantees uninsured bank deposits. A Federal Reserve loan facility would alleviate liquidity issues.

“Speed matters in the circumstances like this,” a senior administration official said of the sudden emergency moves. “These efforts should prevent further contagion.”

At the start of the weekend, the administration’s main priority was to assist Silicon Valley Bank’s asset purchase and oversee a clean transfer of ownership to protect the tens of billions of dollars in uninsured deposits.

While state officials seized Signature Bank on Sunday afternoon, numerous others were on the verge of disaster. Uninsured depositors panicked, and social media exacerbated the situation. Officials worried depositors across the banking system would quickly yank their regional and neighborhood banks.

Emergency precautions were taken to stop spillover consequences. “Should limit depositor runs on solvent institutions,” a senior Treasury official stated.

Authorities hope their efforts will work. After the Fed’s pronouncement, JPMorgan Bank & Co. financed the First Republic, which many inside and outside the administration saw as the next domino to fall. First Republic now has $70 billion in cash to handle customer withdrawals.

Officials said Silicon Valley Bank’s portfolio is unique and would remain isolated if the market is confident.

Officials claimed that was what pushed acts that seemed improbable only a few days ago.

A different administration official added, “This is a key method to enhance confidence.” Officials will observe the market reaction Monday morning. “Right now, we’ll focus on addressing this.”

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