NEW YORK, March 13 (AP) – President Joe Biden told Americans on Monday that the nation’s financial system was safe, trying to appear as if two banks’ swift and stunning collapses raised concerns about broader turmoil. calm.
“Your savings will be there when you need them,” he said.
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U.S. regulators closed Silicon Valley Bank on Friday after a traditional bank run, with depositors scrambling to withdraw their funds in one go. It was the second-largest bank failure in U.S. history, after Washington Mutual’s collapse in 2008. But the financial bloodletting was swift; New York-based Signature Bank also failed.
Speaking from the White House shortly before heading to the West Coast, the president said he would seek to hold those responsible accountable and urged better oversight and regulation of big banks. And promise that there will be no loss to be borne by the taxpayer.
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“We have to have a full picture of what happened,” he said. “Americans can trust the banking system to be safe.”
Biden also said the bank’s management should be fired. “If the banks are taken over by the FDIC, the people who run the banks should no longer be working there,” he said, referring to the Federal Deposit Insurance Corporation, which is responsible for ensuring the stability of the banking system.
Signature Bank, with over $110 billion in assets, was the third largest bank to fail in US history. Another struggling bank, First Republic Bank, announced Sunday that it has strengthened its financial position by securing funding from the Federal Reserve and JPMorgan.
The developments left markets on edge as trading began on Monday. Asian and European markets fell but modestly, while U.S. futures fell.
In an effort to boost confidence in the banking system, the U.S. Treasury, the Federal Reserve and the FDIC said Sunday that all clients of Silicon Valley Bank will be protected and have access to their funds.
“This step will ensure that the U.S. banking system continues to fulfill its important role of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.
Under the plan, depositors at Silicon Valley Bank and Signature Bank, including those with more than $250,000 in insurance limits, will be able to withdraw money on Monday.
The U.K. also moved quickly, trying to arrange the sale of the Californian lender’s U.K. arm, Silicon Valley Bank UK Ltd., for a nominal pound over the weekend.
While the bank is small, holding less than 0.2% of UK bank deposits according to central bank statistics, it plays a major role in financing technology and biotech start-ups that the British government is counting on to drive economic growth.
Britain’s finance minister, Jeremy Hunt, said some of the country’s leading tech companies may have been “killed”.
“When you have very young, very promising companies, they are also vulnerable,” Hunt told reporters, explaining why authorities moved so quickly. “They need to pay their staff and they’re concerned that from 8am this morning they might literally lose access to their bank accounts.”
He stressed that there was never “systemic risk” in the UK’s banking system.
Silicon Valley Bank became insolvent when it was forced to sell some Treasury bonds at a loss to fund customer withdrawals. Under the Fed’s new program, banks could use those securities as collateral and borrow against emergency loans.
The Treasury Department has set aside $25 billion to offset any resulting losses. Fed officials, however, said they did not expect to have to use any of the money given the very low risk of default on the securities used as collateral.
While Sunday’s measures mark the most extensive government intervention in the banking system since the 2008 financial crisis, they are relatively limited compared with 15 years ago. The two failed banks themselves were not rescued, nor were taxpayer dollars provided to them.
Some prominent Silicon Valley executives fear customers will run out of other financial institutions in the coming days if Washington doesn’t bail out their failed banks. Shares of other banks serving tech companies, such as First Republic and PacWest Bank, have tumbled in the past few days.
The bank’s clients include a range of companies from the California wine industry, many of which rely on Silicon Valley Bank for loans, to tech startups working to combat climate change.
Tiffany Dufu, founder and chief executive of The Cru, a New York-based career guidance platform and women’s community, posted a video on LinkedIn Sunday from an airport bathroom, saying the banking crisis was testing her resilience.
Given that her money was frozen at Silicon Valley Bank, she had to pay her employees from her personal bank account. She is raising two teenagers who are going to college, and said she was relieved to hear the government’s intent was to make savers whole.
“Small businesses and early-stage startups don’t have a lot of leverage in this situation, and we’re often in a very vulnerable position, especially when we have to fight to get the wire into your bank in the first place, especially for me Say, as a black female founder,” Dufu said. (Associated Press)
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