In his first response after the collapse of Silicon Valley Bank (SVB), President Joe Biden on Monday assured Americans over the country’s banking system and urged Congress and regulators to strengthen rules on banks.
The focus point of Biden’s message was ‘RRR’—Reassurance (to Americans), Resilience (of the banking system) and Rules (which needed to be strengthened in the banking system).
SVB — a key lender to startups across the United States since the 1980s — collapsed after a sudden run on deposits, prompting regulators to seize control Friday.
In a televised remarks from the White House, Biden said, “Americans can have confidence that the banking system is safe. Your deposits will be there when you need them."
Biden lauded the “immediate" action taken by officials to avert further problems. On Sunday night, US federal authorities stepped in to ensure depositors still had access to their funds at SVB and regulators took over a second troubled lender.
The President asked Congress to enact more stringent regulations, saying that “tough" safeguards brought in after the 2008 financial collapse had been undone under his Republican predecessor Donald Trump.
Biden Says Taxpayer Funds Won’t be Used to Bail Out SVB
The President underlined that emergency measures would not be paid for by taxpayers as additional banks came under stress.
While the government is ensuring that SVB depositors get their money back, “no losses will be borne by the taxpayers," Biden said. “The money will come from the fees that banks pay into the deposit insurance."
After the rout in SVB, San Francisco-based First Republic Bank shares also plunged more than 65 per cent. “The concern is that you’re going to see more individuals, retail individuals, worry about the safety of their banks, and their deposits," said Quincy Krosby of LPL Financial.
“This is where right now, it is an issue of confidence," Krosby added. “Contagion is pure fear, absolute fear, absolute lack of confidence."
Corporation (FDIC) and the Treasury Department said SVB depositors would have access to “all of their money" starting Monday.
They added that depositors in Signature Bank — a New York-based regional-size lender with significant cryptocurrency exposure that was shuttered on Sunday after its stock price tanked — would also be “made whole."
The Fed announced it would make extra funding available to banks to help them meet the needs of depositors, which would include withdrawals.
Hours before Sunday’s joint statement, Treasury Secretary Janet Yellen told CBS that the US government wanted “to make sure that the troubles that exist at one bank don’t create contagion to others that are sound."
Since Friday, there have been calls from the tech and finance sectors for a bailout, which Yellen ruled out.
Yellen said reforms made after the 2008 financial crisis meant the government was not considering this option for SVB.
(with AFP inputs)
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