President Biden on Monday defended the U.S. banking system after regulators scrambled to prevent the collapses of Silicon Valley Bank and Signature Bank from spiraling into a massive financial crisis.
Mr. Biden’s remarks come hours after his administration implemented measures to buttress the banking system and deposits at the two banks, which failed within days of each other.
“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them. Small businesses across the country that deposited accounts in these banks can breathe easier knowing that they will be able to pay their workers and pay their bills,” the president said.
The remarks, delivered from the East Room of the White House, came ahead of the U.S. markets and banks opening Monday morning. Mr. Biden did not respond to reporters’ questions.
All deposits at Silicon Valley Bank and Signature Bank in New York will be guaranteed, the Federal Reserve, Treasury Department and Federal Deposit Insurance Corp. announced Sunday night in a joint statement.
Mr. Biden said individuals and entities with deposits will have access to their money starting Monday and taxpayers won’t be on the hook for any losses incurred in resolving SVB’s failure.
SEE ALSO: Biden admin guarantees Silicon Valley Bank deposits, shutters N.Y. bank in bid to head off crisis
Still, Mr. Biden’s assertion that taxpayers won’t be responsible for resolving the banks’ failures is likely to be disputed. While the program set up to protect depositors is funded with fees paid by U.S. banks, it is ultimately backstopped by the Treasury Department, which is funded by taxpayers.
The Treasury Department announced Sunday it would backstop all deposits at both banks, not just up to $250,000 as insured by federal law.
Mr. Biden detailed a slew of actions his administration has taken to avert a larger financial crisis. He defended the administration’s actions as necessary to ensure the banking system and protect tech employees who could be out of work because of SVB’s collapse, not the bank’s shareholders or executives.
He added that the management of the failed banks will be fired, and investors who pumped money into them will not be protected.
“They knowingly took a risk,” Mr. Biden said of the investors. “And when the risk didn’t pay off, investors lose their money. That’s how capitalism works.”
The Federal Reserve announced Sunday it is creating a lending program for the nation’s banks aimed at protecting them against financial risks caused by SVB’s collapse. Administration officials did not provide a specific figure for the size of the program but said it would cover trillions in potential loan requests.
SEE ALSO: Goldman Sachs doesn’t expect Fed to raise rates in March, citing bank chaos
The flurry of moves by authorities underscores the concerns in the banking sector that a wider, systemic financial system meltdown is on the horizon, much like what happened in 2008.
It also sparked debate among lawmakers and economists over the administration’s scrambling to save the assets of wealthy tech executives in California.
“Building a culture of government intervention does nothing to stop future institutions from relying on the government to swoop in after taking excessive risks,” Sen. Tim Scott of South Carolina, the ranking Republican on the Senate Banking Committee, said in a statement.
Other Republicans were supportive of the president’s actions, with Sen. Mitt Romney of Utah calling it the “right decision.”
Lawmakers on both sides of the aisle are calling for a special investigator to get to the bottom of what happened. In his remarks, Mr. Biden hinted that he was on board with such a measure.
“We must get the full accounting of what happened and why those responsible can be held accountable,” he said. In my administration, no one is above the law.”
The president also said he would ask Congress for stronger rules for the banking sector, including restoring some regulations that were rolled back by the Trump administration.
“Unfortunately, the last administration rolled back some of these requirements. I’m going to ask Congress and the banking regulators to strengthen the rules for banks, to make it less likely this kind of bank failure would happen again,” Mr. Biden said.
California regulators shut down SVB Friday after depositors rushed to withdraw their money amid concerns about its balance sheet, and the FDIC was appointed as its receiver.
SVB was 40 years old and ranked as the 16th largest bank in the U.S. when it collapsed. The bank, which largely catered to tech startups and venture capital firms, is the largest financial institution to fail since Washington Mutual at the height of the 2008 financial crisis.
Regulators in New York took possession of Signature Bank on Sunday, and the FDC was appointed as its receiver. At more than $110 billion in assets, it is the third largest bank failure in U.S. history.