After Silicon Valley Bank bankruptcy, Biden holds officials to account
ALEX WONG / Getty Images via AFP WASHINGTON, DC – MARCH 10: U.S. President Joe Biden delivers remarks on the February jobs report in the Roosevelt Room at the White House on March 10, 2023 in Washington, DC. According to the Labor Department, U.S. employers added 311,000 jobs in February and the unemployment rate rose to 3.6%, two-tenths higher than in January. Alex Wong/Getty Images/AFP (Photo by ALEX WONG / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

ALEX WONG / Getty Images via AFP

US President Joe Biden, here on March 10, 2023, wants to reassure Americans after the bankruptcies of two banks.

UNITED STATES – Joe Biden is firm: those responsible for the bankruptcy of Silicon Valley Bank (SVB, 16th largest bank in the country) and the financial institution Signature Bank will be held to account, committed Sunday March 12 the American president.

“I am firmly dedicated to holding accountable those responsible for this mess”assured Joe Biden in a statement from the White House, assuring that “The American people and American businesses can be confident that their bank deposits will be there when they need them”.

Joe Biden has also indicated that he will speak Monday morning in the United States to reassure Americans about the banking system. “I will comment on how we will maintain a resilient banking system to protect our historic economic recovery”he said Sunday evening in this press release.

The money deposited can be withdrawn in full

At the same time, the American authorities announced a series of measures to reassure individuals and businesses about the solidity of the American banking system and will in particular guarantee the withdrawal of all deposits from the bank Silicon Valley Bank, even beyond the $250,000 limit.

In addition to SVB, they will allow access to all the deposits of another establishment, Signature Bank, which was automatically closed by the regulator, to everyone’s surprise, according to a press release. “I’m glad they found a solution that protects workers, small businesses, taxpayers and our financial system”reacted to this subject Joe Biden.

The Federal Reserve (Fed) – the US central bank – has also agreed to lend the necessary funds to other banks that need them to honor withdrawal requests from their customers.

These measures were taken jointly by Treasury Secretary Janet Yellen, the Fed and the Deposit Guarantee Agency (FDIC), after consultation with US President Joe Biden, the statement said.

“Protecting the American Economy”

The whole system testifies to the turbulence that threatens the American banking system, disturbed by the forced monetary tightening of the Fed. The rise in rates has put pressure on banks, which often lend long-term but borrow short-term, with short rates currently much higher than long rates.

It has also encouraged customers to invest their money in financial products that pay better than current accounts and has shaken up the cash-hungry new technologies sector.

The wave of withdrawals that followed caused the default of three banks this week, namely SVB, Signature Bank but also Silvergate Bank, smaller but known for its privileged links with the cryptocurrency community.

New York-based Signature Bank is the 21st largest US bank, with assets estimated by the Fed at $110 billion, at the end of 2022. Its default is the third largest in US history, behind SVB and Washington Mutual, in 2008.

“Today, we are taking decisive action to protect the U.S. economy by bolstering confidence in our banking system”the Fed, Treasury and FDIC said in their statement. “This initiative will allow the American banking system to continue to play its vital role of deposit protection and access to credit for households and businesses”they continued.

“The situation is not that of 2008”

After the announcement of the FDIC takeover of SVB on Friday, many had worried about the fate of deposits blocked by the institution’s default. Some 96% of them were, in fact, not covered by the traditional guarantee of deposits, which provides up to 250,000 dollars per customer and per bank.

“The banking system is much more resilient and on a much better footing than before the financial crisis”, hammered a Treasury official. “ To be clear, the situation is not like 2008.”

“The Fed’s actions this weekend are intended to end the disruptions in the banking sector and the financial system that had manifested rapidly in recent days”, explained a Fed official. The set of measures unveiled on Sunday were “ necessary to address the systemic risk that we have observed in financial markets”he supported.

The solution announced on Sunday protects depositors but “ the investors (shareholders) of these two banks (SVB and Signature Bank) will lose everything” and their leaders will be replaced, the Fed official stressed.

Impact on the technology sector?

At the same time, the American authorities put SVB up for auction with the aim of finding a buyer as soon as possible. The race against time initiated by the American authorities recalls the weekend of September 13 and 14, 2008.

They had then failed to find a buyer for the Lehman Brothers bank and refused to intervene, pushing it to file for bankruptcy on Monday, with dramatic consequences for the financial sector and the entire economy.

In addition to the stability of the banking system, many expressed concern about the repercussions of the SVB bankruptcy on the technology sector, American but also beyond. SVB prided itself on having as customers “ almost half ” tech and life science companies backed by U.S. investors.

SVB deposits amounted to around $170 billion, according to a document released Wednesday by the establishment, but colossal withdrawals have taken place since. “Many of the depositors are small businesses that need to be able to access their funds to pay their bills and they employ tens of thousands of people” in the United States, noted Janet Yellen, Sunday, on the CBS channel. She had nevertheless ruled out a rescue of SVB via an injection of public money.

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Deborah Acker

I write epic fantasy; self-published via KDP. Devoted dog mom to my 10 yr old GSD, Shadow! DM not a priority; slow response at best #amwriting #author.

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