Washington— President Biden on Monday sought to reassure Americans that they can have confidence in the US banking system after the Silicon Valley Bank collapse and allay any concerns about the fallout from its brutal failure.
“Americans can have confidence in the security of the banking system,” Biden said in brief remarks from the White House. “Your deposits will be there when you need them. Small businesses across the country that have deposit accounts at these banks can breathe easier knowing they can pay their employees and pay their bills, and their employees who are working hard can breathe easier because Good.”
The president’s comments came after US banking regulators spent the weekend work on a plan to bolster public confidence in the soundness of the financial system and limit the ripple effects following the closure of Silicon Valley Bank last week.
Biden Administration officials announced on Sunday that depositors with accounts at Silicon Valley Bank will have access to all of their money starting Monday, and “any losses associated with Silicon Valley Bank’s resolution will not be borne by the taxpayer.”
The emergency action “fully protects” all depositors, said Treasury Secretary Janet Yellen, Federal Reserve Board Chairman Jerome Powell and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg.
Mr Biden reiterated during his address that “no loss will be borne by the taxpayers”, and said the money would instead come from the fees banks pay to the Deposit Insurance Fund.
“Every American should be confident that their deposits will be there if and when they need them,” he said.
Bank investors, however, will not be protected, the chairman said, and management will be fired.
“They knowingly took a risk, and when the risk didn’t pay off, investors lose their money. That’s how capitalism works,” Biden said.
The president also called for a “full account” of what led to the collapse of Silicon Valley Bank and a second institution, Signature Bank of New York, which was taken over by state regulators. Sunday, and how to hold those responsible accountable.
“No one is above the law,” Mr Biden said.
The president said he intends to ask Congress and banking regulators to tighten rules for banks to prevent future failures.
“Americans can rest assured that our banking system is safe. Your deposits are safe,” he said. “Let me also assure you that we will not stop there. We will do whatever is necessary.”
Mr. Biden spoke at the White House before traveling to San Diego, California, for meetings with Australian Prime Minister Anthony Albanese and British Prime Minister Rishi Sunak.
California regulators closed Silicon Valley Bank on Friday after depositors rushed to withdraw cash last week due to concerns about its track record, and the FDIC was appointed as receiver.
Silicon Valley Bank, which was 40 years old and ranked 16th among US banks, largely catered to the tech industry and was used by many start-ups and venture capitalists. It is the largest financial institution to collapse since Washington Mutual at the height of the financial crisis in 2008.
In addition to bolstering federal government deposits at Silicon Valley Bank and Signature Bank, the Fed announced it was rolling out a new emergency lending program, called the bank’s term funding program, “to help ensure that banks have the capacity to meet the needs of all their depositors.”
The FDIC handles the day-to-day operations of Signature Bank, New York Governor Kathy Hochul said Monday, and all deposits, including those that exceed the agency’s $250,000 insurance limit, will be protected.
“Our point of view was to make sure that the whole banking community here in New York was stable, that we can project calm, that this is a time when we could manage a certain tight situation and to make sure that it’s not getting worse,” she said.
Hochul said Signature Bank’s closure “did not happen in a vacuum,” but rather was the effect of depositors watching what happened at Silicon Valley Bank.
Yellen ruled out a federal bailout for Silicon Valley Bank investors, telling “Face the Nation” in an interview that “we’re not going to do it again”.
The president said in a statement on Sunday that the measures agreed to by his administration and banking regulators protect American workers and small businesses and protect our financial system.
“The solution also ensures that taxpayers’ money is not put at risk,” he said. “The American people and American businesses can be sure that their bank deposits will be there when they need them.”