President Joe Biden attempted to assuage nationwide worries about Silicon Valley Bank’s downfall late last week, promising that taxpayers would not bear the brunt of the largest economic collapse in the U.S. since the 2008 financial crisis.
“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” Biden said in a speech Monday morning. “Small businesses across the country that deposit accounts that these banks can breathe easier knowing they’ll be able to pay their workers and pay their bills, and their hard work and employees can breathe easier as well.”
The president’s remarks come on the heels of a chaotic weekend in which U.S. regulators worked to find a buyer for the bank, which held more than $200 billion in assets mostly for tech startups and venture capital firms. Federal regulators scrambled to close Silicon Valley Bank when it experienced a bank run late last week.
But depositors breathed a sigh of relief on Sunday when federal authorities stepped in, agreeing to backstop all depositors for Silicon Valley Bank and Signature Bank — a New York-based bank that also suffered a run on Friday — and to prevent runs on any other financial institutions.
In a surprising move, the Fed also said it would offer cash loans of up to a year for any bank putting up safe collateral. In theory, that would allow banks to handle deposit withdrawals of any amount as authorities seek to reassure people that they don’t need to take their money out at all.
Silicon Valley Bank’s depositors would have access to all their money on Monday, the Treasury Department, Federal Reserve and FDIC promised. The president confirmed that in his speech, saying “every American should feel confident that their deposits will be there if and when they need them.”
During the four-minute speech, Biden emphasized that taxpayers would not pay for the bank’s mistakes, explaining that money will come from the fees that banks pay into the FDIC’s Deposit Insurance Fund to cover the damage. Those who contributed to the collapse, he added, will be reprimanded.
“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 anymore,” Biden said.
Investors are out of luck, too, Biden said: “Investors in the banks will not be protected. They knowingly took a risk, and when the risk [doesn’t] pay off, investors lose their money. That’s how capitalism works.”
Progressives have already begun to signal plans to use the collapse as a cudgel to force reforms, a point cemented by Biden toward the end of his remarks.
“I’m going to ask Congress, the banking regulators, to strengthen the rules for banks to make it less likely this kind of bank failure would happen again,” Biden said, mentioning the Trump administration’s rollback of Obama-era regulations on banks.
In a call with lawmakers Sunday night, Biden administration officials indicated that such a move “is urgent for small businesses that need to make payroll, et cetera. The message, I think, is no widespread panic is necessary,” Sen. Tammy Baldwin (D-Wis.) said Monday morning on CNN.
To ensure such a crisis doesn’t happen again, Baldwin said lawmakers must take another look at regulations loosened years ago, specifically a 2018 deregulation bill aimed at easing some key post-2008 crisis rules on small and regional banks.
A similar sentiment was echoed by Senate Banking Chair Sherrod Brown (D-Ohio) and Rep. Maxine Waters of California, the ranking Democrat on House Financial Services, who said they plan to focus on “how to strengthen guardrails for the largest banks.”
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