On Monday, United States President Joe Biden sought to reassure Americans that the banking system is “safe” following the collapse of Silicon Valley Bank (SVB).
The president also promised to introduce new banking regulations and made further assurances to United States taxpayers that their tax dollars would not be used to cover the collapse of SVB.
At the time of its collapse on March 10, SVB was the 16th largest bank in the United States. The collapse of SVB is the second-largest bank failure in the country’s history.
President Biden’s comments on Silicon Valley Bank failure
“Americans can have confidence that the banking system is safe,” Biden said during a brief address from the White House.
“Your deposits will be there when you need them. Small businesses across the country that deposit accounts at these banks can breathe easier knowing they’ll be able to pay their workers and pay their bills, and their hard-working employees can breathe easier as well,” the President added.
The President reiterated earlier statements by the US Treasury, the Federal Reserve, and Federal Deposit Insurance Corporation (FDIC). According to the government, depositors will be fully protected and taxpayers will not bear any losses.
New banking policies?
Biden also hinted at the possibility of tighter banking regulations in the wake of SVB’s collapse.
“I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure will happen again, and to protect American jobs as a small business,” the President said.
Biden faces a divided Congress and a highly partisan political environment, so passing legislation could be difficult. However, both Republicans and Democrats have been highly critical of SVB’s management, so there could be common ground on which to build consensus.
Over the weekend, Biden’s economic team coordinated with regulators to implement new measures, including guaranteeing deposits in banks, establishing a new facility to give banks access to emergency funds, and making it easier for banks to borrow from the Federal Reserve in the case of an emergency.
SVB was shut down by regulators who seized its assets on Friday. It was the largest failure of a US bank since the financial crisis in 2008.
The crisis was triggered by a Thursday announcement that SVB had lost $1.8 billion after selling securities worth $21 billion to hedge against a challenging market, according to Forbes.
Then the shares of SVB Financial Group started to suffer losses of around 60% on two consecutive days until sales were eventually halted.
Market insiders have expressed concerns about the potential consequences of SVB’s closure on the stock market and banking sector.
SVB, which ranked as the 16th biggest bank in the U.S. at the end of last year, operated 17 branches in California and Massachusetts, all of which reopened on Monday, March 13, for normal business hours. Online banking and other services also resumed, while SVB’s official checks will continue to clear.
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