President Joe Biden sought to reassure Americans this week that the U.S. banking system is safe in the wake of the failure of Silicon Valley Bank and Signature Bank.[0] In a haste, the federal government took steps to support deposits at the two banks, but there is still concern that other regional banks of a similar size could experience similar problems.[1]
Biden said he would ask Congress and banking regulators “to strengthen the rules for banks to make it less likely this kind of bank failure would happen again and to protect American jobs and small businesses.”[2]
The President addressed the nation Monday morning to reassure Americans that their deposits will be there when they need them.[3]
“No losses will be borne by the taxpayers. Let me repeat that: No losses will be borne by the taxpayer,” Biden said.[4] The Deposit Insurance Fund will be funded by the fees paid by banks.[4]
Biden also said that the leadership of any bank that is taken over by the FDIC will be fired, making it clear those responsible will be held responsible.[5]
In order to avoid any further breakdowns in the financial sector, the Federal Reserve has provided funds to other banks.[6]
First Republic, a regional bank based in San Francisco with $213 billion in assets and 7,200 employees, fell more than 70% in early trading only one day after the company said it has added more cash to its reserves.[7] The infusion of capital came from the Federal Reserve and JPMorgan Chase, First Republic said.[7]
Rather than bailing out the bank, the Biden administration and federal regulators said they would backstop customers’ deposits — even those that weren’t insured.[8] Customers of Signature, a New York regional lender, would have had the same protections as those of SVB, however, the former folded when depositors appeared to be alarmed by the latter’s failure.[8]
“Government should no longer choose winners and losers,” Vice President Mike Pence said.[9] In order to maintain a strong, healthy and prosperous free market, it is essential that we take the necessary steps to do so.[10]
Silicon Valley Bank is a publicly traded bank based in Santa Clara, Calif., and is considered one of Silicon Valley’s most important banks.[11] As of December 31st, Silicon Valley Bank possessed approximately $209 billion in total assets.[11] In order to make good on withdrawals, SVB had to sell part of its bond holdings at a steep loss of $1.8 billion, the bank said last week.[6]
0. “Post-mortems begin on Silicon Valley Bank failure” Roll Call , 14 Mar. 2023, https://www.rollcall.com/2023/03/13/biden-raps-2018-bank-law-as-post-mortems-begin-on-svb-failure/
1. “Biden says banking system safe after two banks fail in a matter of days” CBS News, 14 Mar. 2023, https://www.cbsnews.com/video/biden-says-banking-system-safe-after-two-banks-fail-in-a-matter-of-days/
2. “Biden Says Saving Silicon Valley Bank Helped Economy ‘Breathe Easier’—But Not All Experts Agree” Forbes, 13 Mar. 2023, https://www.forbes.com/sites/dereksaul/2023/03/13/biden-says-saving-silicon-valley-bank-helped-economy-breathe-easier-but-not-all-experts-agree
3. “What to know about FDIC insurance and how your money is protected” ABC News, 13 Mar. 2023, https://abcnews.go.com/Business/money-fdic-protects/story?id=97831935
4. “Banking experts reject Biden denial of Silicon Valley depositor bailout: ‘This is certainly a bailout’” Fox News, 14 Mar. 2023, https://www.foxnews.com/media/banking-experts-reject-biden-denial-silicon-valley-depositor-certainly-bailout
5. “Inside Biden’s SVB move to stop future bank runs” Axios, 14 Mar. 2023, https://www.axios.com/2023/03/14/biden-svb-stop-bank-runs
6. “After Silicon Valley Bank collapses, plenty of worries over what’s next” NPR, 14 Mar. 2023, https://www.npr.org/2023/03/14/1163135286/silicon-valley-bank-collapse-fallout-whats-next
7. “First Republic Bank stock price nosedives after Silicon Valley Bank collapses” CBS News, 13 Mar. 2023, https://www.cbsnews.com/news/first-republic-bank-stock-price-silicon-valley-bank-signature-bank/
8. “Wall Street pummels regional banks, despite Biden’s assurances” CNN, 13 Mar. 2023, https://www.cnn.com/2023/03/13/investing/first-republic-bank/index.html
9. “2024 GOP field weighs in on Silicon Valley Bank collapse” NBC News, 14 Mar. 2023, https://www.nbcnews.com/meet-the-press/meetthepressblog/2024-gop-field-weighs-silicon-valley-bank-collapse-rcna74914
10. “Pence: It’s disingenuous for Biden to say taxpayers won’t pay for bank ‘bailout’” The Hill, 14 Mar. 2023, https://thehill.com/blogs/blog-briefing-room/3899908-pence-its-disingenuous-for-biden-to-say-taxpayers-wont-pay-for-bank-bailout
11. “Biden seeks to calm Americans after government intervenes in SVB collapse” The Washington Post, 13 Mar. 2023, https://www.washingtonpost.com/politics/2023/03/13/biden-silicon-valley-bank-federal-regulators/