Biden seeks to calm Americans after government intervention in SVB collapse
Biden’s remarks followed an announcement by his administration on Sunday evening that all SVB depositors would have access to all their money on Monday morning – an extraordinary intervention aimed at averting a crisis in the financial system.
Biden said on Monday that managers would be replaced at Silicon Valley Bank and all others taken over by the Federal Deposit Insurance Corporation.
“The people running the bank shouldn’t be working there anymore,” Biden said.
He noted that while customers would still have access to their money, bank investors would not be protected.
“They knowingly took a risk,” Biden said. “And when the risk hasn’t paid off, investors lose their money. This is how capitalism works.
Biden also said he would ask Congress and banking regulators “to strengthen rules for banks to reduce the risk of this type of bank failure happening again and to protect American jobs and small businesses.”
He warned there will be consequences for banks that collapse.
“There are significant questions about how these banks got into this in the first place,” Biden said. “We need to get the full account of what happened and why (so) those responsible can be held accountable.”
Authorities said they were also extending protection to depositors at a second bank, Signature Bank of New York, which state regulators closed on Sunday as financial sector unease spread. Separately, the Federal Reserve announced it was creating a loan facility for banks nationwide, designed to protect them from financial risks caused by Friday’s collapse of SVB.
Fed officials declined to provide a specific figure for the size of this new loan program, but made it clear that it would be large enough to cover trillions of dollars in potential demands.
The series of crisis maneuvers by the federal authorities – announced just hours before the start of trading in Asia – reflects the fear that has spread in the banking sector just days after the collapse of Silicon Valley Bank, which many financial experts initially thought to be an isolated episode.
The Treasury’s decision to guarantee all deposits at SVB and Signature — not just those up to $250,000 that are insured under federal law — was based on a judgment that it was necessary to avoid a ‘systemic’ collapse. wider. The move will likely spark a political storm over the decision to protect the assets of tech companies, venture capitalists and other wealthy people in California.
In a call with reporters Sunday evening, a senior Treasury official defended the administration’s decision as necessary to stabilize the banking system and said the move would protect businesses and workers who could be harmed by the bank collapse – not the bank’s shareholders or management. The official spoke on condition of anonymity to describe the internal deliberations.
The decision to protect all deposits was made following unanimous recommendations from the boards of the Federal Deposit Insurance Corporation and the Federal Reserve, the nation’s primary banking regulators. Biden was also consulted on the ad.
SVB, which largely served start-ups and venture capitalists, was shut down by regulators and taken over by the federal government after depositors rushed to withdraw their money following a surprise deposit from the company last week that it had sold $21 billion in assets and was selling more of its own stock to shore up its balance sheet.
At the end of December, SVB held about $209 billion in total assets, making it the second largest failure by a federally insured bank after Washington Mutual, which collapsed during the 2008 financial crisis.
Jeff Stein, David J. Lynch, Tony Romm and Tyler Pager contributed to this report.