President Joe Biden tried to allay national concerns about Silicon Valley Bank's collapse by guaranteeing that taxpayers wouldn't take on the burden of the country's worst economic collapse since the 2008 financial crisis.
The president's remarks follow a hectic weekend in which US officials tried to sell the bank, which has more than $200 billion in assets, mainly from tech companies and venture capital firms. Once a bank run occurred at Silicon Valley Bank late last week, federal officials rushed to shut it down.
Biden Reassures Stability of US Banking System
But when federal regulators intervened on Sunday, they agreed to guarantee all Silicon Valley Bank and Signature Bank depositors. This New York-based bank also had a run on Friday to avert runs on other financial institutions. Depositors were relieved.
Surprisingly, the Fed also announced that it would grant cash loans of up to a year to any bank that provided secure collateral. Theoretically, that would enable banks to manage withdrawals of deposits of any amount while officials work to persuade citizens that they don't need to take their money out.
The Treasury Department, Federal Reserve, and FDIC guaranteed that all of the money held by Silicon Valley Bank's depositors would be available to them on Monday. Asserting that "every citizen should feel sure that their deposits will be there if and when they need them," the president said in his speech.
Moreover, Biden criticized SVB and other failing banks' executives, saying those responsible for the present crisis "will be fired." The federal government will get a "full accounting of what happened and why," added Biden.
While the affected depositors' funds would be insured, Biden pointed out that "investors in the banks will not be protected" since they "knowingly took a risk" by investing money in SVB, Politico reported.
In addition, Biden attacked former President Donald Trump, claiming that his government had repealed rules that would have helped to avert the current catastrophe. Biden promised a reform that would defend American employment and small companies and make this sort of bank disaster less likely to happen again.
After his brief remarks, Biden exited the platform without answering reporters' shouted questions. Hours before Biden's address, federal regulators took exceptional measures to save SVB and prevent a collapse of the banking industry.
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US Bank Collapse 2023
The Treasury Department, Federal Reserve, and Federal Deposit Insurance Corp. stated in a joint statement on Sunday that they were taking steps "that fully protect all depositors" at SVB and another defunct company, Signature Bank in New York.
Per NY Post, the Treasury Department labeled SVB and Signature Bank as systemic concerns, opening the path for extreme steps. According to the federal government, all bank depositors will have access to all of their money on Monday, and "the taxpayer would not bear any losses related to Silicon Valley Bank's resolution."
On Monday, the FDIC closed down SVB, bringing about the shocking collapse of a tech lender that entrepreneurs and venture capital organizations had formerly coveted.
The government took control after SVB's disclosure of a $1.8 billion loss on its bond assets, which frightened investors into staging a run on the bank and attempting to withdraw their accounts.
With almost $209 billion in assets, SVB was the 16th-largest bank in the US before its collapse. Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg stated that the emergency measure "fully protects" all depositors.
During his remarks, Biden emphasized that "no losses would be borne by the taxpayers" and that the funding would come from the fees that banks pay into the Deposit Insurance Fund. Every citizen should have faith in their deposits' availability when it comes.
Nonetheless, the president stated that management would be sacked and institutional investors would not be protected. In addition, the president demanded a "full accounting" of the events that led to the collapse of Silicon Valley Bank and a second institution, Signature Bank of New York, which state regulators took over on Sunday, and measures to penalize those culpable.
The president stated that to prevent such bank collapses; he plans to push Congress and banking authorities to tighten bank regulations. The 16th largest bank in the United States at 40 years old, Silicon Valley Bank served the tech sector primarily and was a favorite of start-ups and venture capital firms. With Washington Mutual's collapse during the financial crisis in 2008, it is the largest financial institution to have collapsed, as per CBS News.
With the federal government shoring up deposits at Silicon Valley Bank and Signature Bank, the Fed also said it was establishing a new emergency lending program dubbed the Bank Term Funding Program to help guarantee banks can satisfy the demands of all their depositors.
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