Biden: Safe banking system, your deposits will be there when you need them, President Biden tells US citizens

NEW YORK: President Joe Biden told U.S. residents on Monday that the nation’s financial systems are sound, following the rapid and stunning collapse of two banks that sparked fears of a broader disruption.
“Americans can have confidence that the banking system is secure,” he said from the Roosevelt Room before a trip to the West Coast. “Your deposits will be there when you need them.”
US regulators shut down the Silicon Valley Bank on Friday after suffering a traditional bank run, in which depositors rushed to withdraw their funds all at once. It is the second largest bank failure in U.S. history, behind only the failure of Washington Mutual in 2008.
As evidence of the speed with which the financial bleeding was occurring, regulators announced that New York-based Signature Bank had also failed.
The president, speaking from the Roosevelt Room just before US markets opened, said he would try to hold those accountable and pressed for better oversight and regulation of the biggest banks. And he promised that no losses would be borne by the taxpayers.
The US and UK governments are taking extraordinary steps to avert a potential banking crisis after the failure of California-based Silicon Valley Bank sparked fears of a broader upheaval.
US regulators worked over the weekend to find a buyer for the bank, which had more than $200 billion in assets and was targeting tech startups, venture capital firms and well-paid tech workers.
While those efforts appeared to have failed, officials assured all bank customers that they would be able to access their money on Monday.
The assurances came as part of a large emergency loan program intended to prevent a wave of bank runs that would have threatened the stability of the banking system and the economy as a whole.
Meanwhile, the Bank of England and the UK Treasury said on Monday they facilitated the sale of the bank’s London branch to HSBC, Europe’s largest bank, securing £6.7 billion (£8.1 billion dollars) of deposits.
Regulators in the US were quick to shut down Silicon Valley Bank on Friday when it suffered a traditional bank run, in which depositors rushed to withdraw their funds all at once. It is the second largest bank failure in U.S. history, behind only the failure of Washington Mutual in 2008.
As evidence of the speed with which the financial bleeding was occurring, regulators announced that New York-based Signature Bank had also failed and would be seized on Sunday.
With assets of more than $110 billion, Signature Bank is the third largest bank failure in US history. Another beleaguered bank, First Republic Bank, announced Sunday that it had bolstered its financial health by gaining access to funding from the Fed and JPMorgan Chase.
The developments left markets jittery as trading got underway on Monday. Asian and European markets fell, but not dramatically, and US futures fell.
In an effort to boost confidence in the banking system, the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said on Sunday that all Silicon Valley Bank customers will be protected and have access to their money.
“This step will ensure that the U.S. banking system continues to fulfill its vital roles of protecting deposits and providing access to credit for households and businesses in a way 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 whose holdings exceed the $250,000 insurance limit, will be able to access their money on Monday.
The UK also moved quickly, working throughout the weekend to arrange the sale of Silicon Valley Bank UK Ltd., the Californian bank’s UK branch, for the nominal sum of one pound.
Although the bank is small, with less than 0.2% of UK bank deposits according to central bank statistics, it has played a major role in funding the tech and biotech startups that the UK government is counting on to fuel economic growth.
Jeremy Hunt, head of the UK government’s Treasury, said some of the country’s leading tech companies could be “wiped out”.
“When you have very young companies, very promising companies, they are also fragile,” Hunt told reporters, explaining why authorities moved so quickly. “They need to pay their staff and were concerned that as of 8am this morning, they may literally not be able to access their bank account.”
He stressed that there has never been “systemic risk” to the UK’s banking system.
In the US, officials have characterized their lending program as similar to what central banks have done for decades: Lending freely to the banking system so customers were confident they could access their accounts when needed.
This will allow banks that need to raise cash to pay depositors to borrow that money from the Fed, rather than having to sell Treasuries and other securities to raise it.
Silicon Valley Bank began to slide into insolvency when it was forced to unload some of its loss-making Treasuries to fund its customers’ withdrawals. Under the Fed’s new program, banks can deposit such securities as collateral and borrow from the emergency facility.
The Treasury has set aside $25 billion to offset any losses incurred. Fed officials said, however, that they don’t expect to have to use that money, given that the securities posted as collateral have a very low risk of default.
Although Sunday’s steps marked the largest government intervention in the banking system since the 2008 financial crisis, the actions are relatively small compared to what was done 15 years ago. The two failed banks themselves were not bailed out and not provided with taxpayer money.
President Joe Biden said Sunday evening as he boarded Air Force One to return to Washington that he would speak on the situation on Monday.
In a statement, Biden also said he was “firmly committed to holding those responsible for this mess fully accountable and continuing our efforts to strengthen oversight and regulation of the biggest banks so we don’t find ourselves in this position again.”
Some prominent Silicon Valley executives feared that if Washington didn’t bail out the failing bank, clients would run to other financial institutions in the coming days. Stock prices have tumbled in recent days at other banks targeting tech companies, including First Republic and PacWest Bank.
Among the bank’s clients are a number of companies in the Californian wine industry, where many wineries rely on Silicon Valley Bank for loans, and tech startups dedicated to fighting climate change.
Tiffany Dufu, founder and CEO of The Cru, a New York-based community and career coaching platform for women, posted a video on LinkedIn Sunday from an airport restroom, saying the banking crisis was testing her resilience. .
Since his money was tied up with Silicon Valley Bank, he had to pay his employees from his personal bank account. With two teenagers supporting whoever goes to college, she said she is relieved to hear the government’s intent is to make depositors whole.
“Small businesses and early stage startups don’t have much access to leverage in a situation like this, and we often find ourselves in a very vulnerable position, particularly when we have to fight so hard to get wire transfers into your bank account to begin with. , especially for me, as a Black female founder,” Dufu said. ___ Rugaber and Megerian reported from Washington. Sweet and Bussewitz reported from New York. Associated Press writers Hope Yen in Washington, Jennifer McDermott in Providence, Rhode Island, and Danica Kirka in London contributed to this report.


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