President Joe Biden on Monday said the U.S. banking system is ‘safe’ and assured on-edge taxpayers they won’t foot the bill for the stunning collapse of Silicon Valley Bank.
Biden tried to project calm amid fears of a financial meltdown and a run on the banks after shares plummeted 74 percent in pre-market trading amid the second-largest banking collapse in U.S. history.
He defended his administration’s response in his less than four-minute remarks, said the executives at Silicon Valley Bank should be fired and pointed the finger at Donald Trump for rolling back regulations.
‘Americans can have confidence that the banking system is safe,’ he said from the Roosevelt Room before a trip to California. ‘Your deposits will be there when you need them.’
The remarks were short and the president did not take any questions before leaving the White House for a trip to California on Monday.
President Biden tried to help avoid a banking crisis with short remarks Monday morning
Silicon Valley Bank customers wait outside a branch in Wellesley, Massachusetts on Monday, March 13, 2023 after the Federal Deposit Insurance Corporation (FDIC) took control of the bank’s assets following the second-largest collapse in U.S. history
Biden’s remarks were meant to reassure the nation after the collapse of two banks in the matter of a few days and just minutes before the U.S. markets opened at 9:30 a.m.
He said that while depositors will be protected, investors will not, claiming: ‘That’s how capitalism works.’
The dollar fell Monday based on expectations the Federal Reserve will be less aggressive in raising interest rates after authorities stepped in to limit the fallout from SVB’s collapse.
Republicans’ priority is that American taxpayers do not have to help dig these banks out of their own graves, which the Biden administration has been adamant will not happen.
‘No losses will be borne by the taxpayers,’ Biden said Monday morning.
‘Instead the money will come from the fees the banks pay into the deposit insurance fund. Because of the actions that our regulators have already taken, every American should feel confident that their deposits will be there if and when they need them.’
He also said: ‘The management of these banks will be fired. If the bank is taken over by FDIC, the people running the bank should not work there any more.’
‘Investors in the banks will not be protected,’ the president added. ‘They knowingly took a risk and when the risk didn’t pay off, investors lose their money. That’s how capitalism works.’
SVB’s swift downfall on Friday is the second-largest banking collapse in history and has ignited fears of a contagion in the banking sector amid the Federal Reserve’s sharpest rate hike cycle since the early 1980s.
First Republic Bank’s shares dropped as low as $47.25 Monday amid frantic fears of a banking rout when Wall Street opens trading for the first time since SVB and New York’s Signature Bank shuttered.
Biden said that he is calling on Congress and regulators to strengthen rules for banks to make sure these types of failures won’t happen in the future.
‘The bottom line is this – Americans can rest assured that our banking system is safe,’ the president assured.
Treasury Department Secretary Janet Yellen said Sunday that the federal government would not bail out banks like was done with institutions during the 2008 Great Recession.
A customer attempting to find out information on his accounts departs after being turned away by security at the Park Avenue location of Silicon Valley Bank in New York City on Monday
Law enforcement officers stand guard at the entry of a SVB branch in Massachusetts on Monday
The president spoke for roughly four minutes before leaving without taking questions to catch his flight to California
New York’s Signature Bank also shuttered on Sunday in a fallout from the SVB implosion. Pictured: Signature Bank’s headquarters offices on Fifth Avenue in New York City
Republicans want to make sure that taxpayers don’t pay a penny and has sparked debate over what role the government plays in helping out in the financial sector.
‘I hope the president will calm the waters,’ Texas Senator John Cornyn said Monday morning on Fox News. ‘There was no reason for people to panic.’
‘The federal deposit will protect people who deposits $250,000 or less,’ the Republican lawmaker added. ‘My understanding is this bank was making long term investments and wasn’t ready for the spike in interest rates caused by the Fed raising the discount rate. But hopefully, there will be a smooth transition to protect all depositors without the taxpayers being fit for the bill.’
Biden’s remarks attempted to shore up trust in the banking sector after the White House guaranteed over the weekend it would make SVB and Signature Bank customers ‘whole’ and that ‘no losses will be borne by the taxpayer.’
But investors smell blood in the water, with multiple U.S. banks suffering in early trading. PacWest Bancorp’s stock tumbled 41 percent; Western Alliance Bancorp’s shares slid 33 percent; and Bank of America’s stock fell 4 percent.
Regulators came up with a plan Sunday to backstop depositors who have money at SVB to help stem fear of systematic panic that could lead to a run on other banks this week.
Depositors at SVB and Signature Bank in New York, which shuttered on Sunday, will have full access to their money starting Monday.
A run on Silicon Valley Bank last week following a massive drop in shares led to the bank’s doors shuttering on Friday and New York’s Signature Bank following suit on Sunday
Officers stand at the entrance of an SVB branch in Wellesley, Massachusetts ahead of markets opening on Monday, March 13, 2023 – and just three days after the bank shuttered and FDIC took control of its assets to guarantee depositors their money
SVB is a tech-focus institution where many start-ups have kept their funds, while Signature is a popular funding source for cryptocurrency companies.
After a 60 percent drop in shares of the country’s 16th largest bank last week, there was a run on SVB that saw $42 billion in withdrawals in a single day on Thursday and a total collapse of the institution on Friday.
Lawmakers and financial experts said over the weekend that the only hope for SVB was for a last-minute buyer to come in on Sunday and save SVB before the markets open on Monday.
The Treasury Department designated SVB and Signature as systematic risks – this allowed the Department the authority to unwind the institutions to ‘fully protect all depositors.’
The Federal Deposit Insurance Corporation (FDIC) deposit insurance fund will be used to help cover making funds available to depositors. Many were uninsured because there was a $250,000 cap on guaranteed deposits.
The Federal Reserve is also creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability and waves made by the SVB failure.
Republicans are arguing against a bail out because they don’t want the burden to fall on American taxpayers – even though it doesn’t appear that the administration is considering that move.
‘We’re not going to do that again,’ Yellen said on CBS News on Sunday regarding the potential of a 2008-era bailout. ‘But we are concerned about depositors and are focused on trying to meet their needs.’
A police officers speaks on Monday to the door man at the Park Avenue branch location of SVB in New York City
Members of NYPD posted up outside an SVB branch on Park Avenue in New York City on Sunday, March 12 as lawmakers hoped for a buyer to come in to save the crisis-hit bank
Florida Gov. Ron DeSantis, who is expected to enter the 2024 GOP nomination race, suggested the collapse was due to institutions’ increased distraction by diversity, equity and inclusion goals.
He often argues such so-called ESG (environmental, social and corporate governance) efforts go too far.
‘This bank, they’re so concerned with DEI and politics and all kinds of stuff, I think that really diverted from them focusing on their core mission,’ he said in an interview with Fox News’ Sunday Morning Futures.
‘We have such a morass of federal regulations,’ he added, portraying the collapse as a failure of federal regulators. ‘We have a massive federal bureaucracy, and yet they never seem to be able to be there when we need them to prevent something like this.’
Former South Carolina governor and United Nations ambassador Nikki Haley, who is running for the GOP presidential nomination, was among the first in the still-emerging Republican field to call for no taxpayer exposure to SVB’s failure.
‘Taxpayers should absolutely not bail out Silicon Valley Bank,’ she said in a statement. ‘Private investors can purchase the bank and its assets. It is not the responsibility of the American taxpayer to step in. The era of big government and corporate bailouts must end.’
Fellow 2024 Republican presidential candidate Vivek Ramaswamy, a multimillionaire biotech company founder and investor, also argued against a bailout.
‘Silicon Valley Bank made some uniquely bad management decisions,’ he said Sunday in an interview with CNN. ‘I do not think we should reward that kind of bad behavior, that kind of bad mismanagement.’
GOP Rep. Nancy Mace said on CNN Sunday that she wouldn’t support a bailout: ‘We cannot keep bailing out private companies, because there’s no consequences to their actions. People when they make mistakes, or break the law, have to be held accountable in this country.’