Washington, Mar 13 (EFE).- President Joe Biden sought to reassure Americans after the collapse of Silicon Valley Bank and Signature Bank of New York, saying in televised remarks on Monday that the United States’ banking system is safe and that customers of those two shuttered institutions will have access to their deposits.
“Your deposits will be there when you need them,” he said in brief remarks at the White House a day after regulatory institutions launched a plan to fully protect SVB’s depositors following the bank’s collapse and also closed Signature Bank under the same parameters.
“Americans can have confidence that the banking system is safe … In my administration, no one is above the law,” Biden said, adding that no losses related to the failed banks would be borne by US taxpayers.
Investors and depositors rushed to pull more than $40 billion out of California-based SVB last Thursday, a day after the bank announced that it had taken a $1.8 billion loss on the sale of US Treasuries and mortgage-backed securities and announced a plan to raise some $2.25 billion in fresh capital to shore up its finances.
That massive bank run and huge tumbles in SVB’s share price on Thursday and in pre-market trading on Friday prompted regulators to close the bank at midday Friday.
SVB’s woes quickly spread to other companies across the US financial industry and beyond, with banks’ share prices tumbling on Thursday and Friday and continuing to fall on Monday.
The US Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) on Sunday announced that people and businesses would have access to all of the money they had deposited at SVB from Monday and said Signature Bank’s depositors would also be made whole.
The president said the managers of the two banks taken over by regulators “will be fired” and that investors in those companies’ securities will not be protected.
“If the FDIC takes over the bank, the people who run it should no longer work there,” Biden said in his address. “Investors in the banks will not be protected. They knowingly took a risk and when the risk didn’t pay off, the investors lose their money. That’s how capitalism works.”
With his speech, the president sought to assuage concerns about a repeat of the 2008 financial crisis.
“We must reduce the risk of this happening again,” he said, accusing his Republican predecessor, Donald Trump, of scrapping some banking regulations that had been put in place during Democratic head of state Barack Obama’s administration.
Biden therefore said he will call on Congress and regulators to strengthen rules to lower the chance of this type of collapse in the future and to protect jobs and small businesses.
“The bottom line is this: Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed,” said the president, who made clear that the money to cover the losses of SVB and Signature Bank will come from the fees paid by banks into the FDIC. EFE