Biden vows to hold those responsible for Silicon Valley Bank’s failure ‘fully accountable’


President Joe Biden said Sunday that, under his leadership, US Treasury Secretary Janet Yellen and her top economic adviser Lael Brainard worked with financial regulators to ensure that households and businesses affected by the Silicon Valley Bank failures and Signature Bank can access their deposits, and he promised to hold officials accountable.

“I am thrilled that they have reached a quick solution that protects American workers and small businesses and keeps our financial system safe. The solution also ensures that taxpayers’ money is not put at risk,” Biden said in the statement.

“I am firmly determined to hold those responsible for this mess fully accountable and to continue our efforts to strengthen the supervision and regulation of the big banks so that we do not find ourselves in this situation again,” he added.

Treasury officials briefed a bipartisan group of lawmakers from both houses of Congress on Sunday evening, and Biden plans to make remarks Monday on maintaining a “resilient banking system.”

The administration decided to move forward with dramatic emergency actions on Sunday to extend a federal backstop to all Silicon Valley Bank deposits to ensure access to all those funds on Monday, according to a senior treasury official.

The emergency action was coupled with the announcement of a new Federal Reserve lending facility and put in place during a weekend of furious behind-the-scenes efforts within the US government to respond to the deep concern about the fate of small businesses and people at risk of not being able to access their funds.

It also sparked broader and more systemic fear that failure to deliver their funds to all depositors on Monday would create a wider contagion that would spread through the banking sector. When the FDIC took over the bank on Friday, it announced that it would pay customers their insured deposits on Monday, which only covers up to $250,000.

But there was a lot of money – and influence – at stake. The main focus had been trying to resolve the plight of those who held uninsured deposits – many of them small businesses that would probably have to weigh mass layoffs in case they cannot access their funds to make payroll.

CNN previously reported that the Federal Deposit Insurance Corporation solicited offers over the weekend from other banks to potentially buy Silicon Valley Bank.

But the Treasury official noted that “things moved very quickly” over the weekend and the decision was made to “act early” and trigger the systemic risk exception – a designation that offers more flexibility to immediately advance funds to those holding deposits above the current FDIC-covered $250,000 threshold.

The official said it would have been “quite difficult” for a potential buyer to go through SVB’s books, agree to buy the assets and be ready to open on Monday. Instead, with federal regulators closely watching the clock ahead of the opening of financial markets in Asia, the decision was made to pull the trigger on government actions.

Yellen asked the Federal Deposit Insurance Corporation on Sunday to guarantee that SVB customers will have access to all their money starting Monday – an attempt to ensure public confidence in the American banking system, said Yellen, the president of the Federal Reserve, Jerome Powell, and FDIC Chairman Martin J. Gruenberg. in a joint statement.

Yellen said earlier on Sunday that the government would not bail out the bank after a number of lawmakers spoke out against such an idea.

“Let me clarify that during the financial crisis, there were investors and owners of large, systemic banks that were bailed out, and we’re certainly not looking,” Yellen told CBS News when asked. there would be a bailout. “And the reforms that have been put in place mean we’re not going to do it again.”

Yellen said she heard about depositors all weekend, many of which are “small businesses” and employ thousands of people. “I have been working all weekend with our banking regulators to design appropriate policies to deal with this situation,” the Treasury Secretary said, declining to provide further details.

SVB collapsed on Friday morning after a staggering 48 hours in which a bank run and capital crisis led to the second-largest financial institution failure in US history.

The chaos over high interest rates led to the old-fashioned bank run on Thursday, in which depositors ripped off $42 billion from the SVB.

SVB has provided funding to nearly half of America’s venture-backed technology and healthcare companies. At the end of 2022, the bank said it had $151.5 billion in uninsured deposits, including $137.6 billion held by U.S. depositors.

Although relatively unknown outside of Silicon Valley, SVB was among the top 20 U.S. commercial banks, with $209 billion in total assets at the end of last year, according to the FDIC. It is the largest lender to fail since Washington Mutual collapsed in 2008.

Despite initial panic on Wall Street over the run on SVB, which cratered its shares, analysts said the bank’s collapse was unlikely to trigger the kind of domino effect that gripped the banking industry for the financial crisis of 2008.

Shalanda Young, director of the White House Office of Management and Budget, pointed out in an interview Sunday with CNN’s Kaitlan Collins that the U.S. banking system as a whole is now “more resilient.”

“He has a better base than before the financial crisis. This is largely due to the reforms that have been put in place,” Young said on “State of the Union.”

Democratic and Republican leaders were in phone conversations Sunday night with Treasury officials, as were many rank-and-file lawmakers, a source briefed on the call told CNN. House Speaker Kevin McCarthy and Senate Majority Leader Chuck Schumer have raised concerns about the systemic failure of the economy.

GOP Sen. Mitt Romney of Utah acknowledged the goal of avoiding panic when markets open on Monday, but expressed concern about what would happen if the actions taken by federal regulators on Sunday night do not were not enough to stop further bank runs.

Meanwhile, South Carolina Sen. Tim Scott, a ranking Republican on the Senate Banking Committee and potential GOP presidential nominee, warned Sunday night against “building a culture of intervention government”.

“Building a culture of government intervention does nothing to prevent future institutions from relying on government to step in after taking undue risks,” Scott said in a statement. “I remain committed to bringing accountability and answers to the American people, both from banks and from our regulators. We deserve to know exactly what happened and why.

And ahead of the Biden administration’s extraordinary announcement on Sunday night, the collapse had sparked a bailout debate in Washington as lawmakers weighed the fallout.

California lawmakers were unanimous in their agreement that the government should help find a buyer for the bank rather than bailing it out, two sources familiar with the Treasury briefing with them on Sunday told CNN. Punchbowl News first reported the Treasury briefing with the California delegation.

“Our first and foremost concern must be with the affected workers and their paychecks,” Democratic Rep. Adam Schiff of California told CNN in a statement.

Republican Representative Nancy Mace of South Carolina told Collins in a separate ‘State of the Union’ interview that she did not support a bailout ‘at this time’, but warned: ‘It is still very early”.

“We cannot continue to bail out private companies because there are no consequences for their actions. People, when they make mistakes or break the law, need to be held accountable in this country,” she said.

Democratic Rep. Ro Khanna, who represents much of Silicon Valley, said the Treasury Department needs to be more aggressive to ensure all SVB depositors will have access to their money.

“The principle should be that all depositors will be protected and have full access to their accounts on Monday morning,” Khanna told CBS News. Khanna also clarified that investors and shareholders of SVB, which is headquartered in his district, should not be bailed out.

“I have no sympathy for the leaders, no sympathy for the people who have shares there. But the depositors are protected,” he said.

Kevin Cramer, a member of the Senate Banking Committee, said he hoped SVB’s collapse would be “very localized and we can address it that way.”

“The problem is that we live in very emotional times, where markets are emotional. The reference to social media as being an accelerator, if you will, of some of that emotion, I think, can be problematic,” said the North Dakota Republican told NBC News “But hopefully with the weekend came some calm and certainly some strategy as well.”

This story and headline have been updated with additional reports.

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