The American people can have confidence that the US banking system is safe and sound, despite the failures of Silicon Valley Bank and Signature Bank, President Joe Biden said during prepared remarks on Monday, March 13.
Biden confirmed that customer and small business deposit accounts will be available to access immediately, ensuring the banks’ clients “can breathe easier knowing they’ll be able to pay their workers and pay their bills.” He assured the public that “no losses will be borne by the taxpayers.” Instead, account holders will receive money from the fees that financial institutions pay into the deposit insurance fund.
The Federal Reserve, the Treasury Department, and the Federal Deposit Insurance Corporation (FDIC) released a joint statement on March 12, outlining their approach to tackling the collapse of SVB and Signature Bank. The FDIC’s fund will cover depositors since many of them were uninsured because of a $250,000 limit on guaranteed deposits. The US central bank will develop a new Bank Term Funding Program (BTFP) that will extend loans of up to one year for companies impacted by SVB’s failure. Finally, the Treasury will extend up to $25 billion from its Exchange Stabilization Fund in the event of any losses from the funding program.
President Biden confirmed on Monday that if the FDIC takes over these banks, management will be fired and investors will not be protected. “They knowingly took a risk, and when the risk didn’t pay off, investors lose their money. That’s how capitalism works,” he said. “We must get the full accounting of what happened and why those responsible can be held accountable. In my administration, no one in my room, no one is above the law.”
Biden also remarked that part of the reason for SVB’s downfall was that former President Donald Trump and his administration rolled back some requirements in the Dodd-Frank law. As a result, the president will ask Congress and banking regulators to “strengthen the rules for banks to make it less likely this kind of bank failure would happen again.”
“But the bottom line is this: Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed,” he stated.
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