The President of the United States, Joe Biden, has sent a message of tranquility this Monday to the Americans by stressing that the country’s banking system “is safe” and made it clear to Silicon Valley Bank and Signature Bank customers that they will have their deposits.
“Your deposits will be there when you need them”he said in a brief intervention before the press a day after the regulatory bodies launched a plan to protect the deposits of Silicon Valley Bank (SVB) after its collapse and closed another banking institution, Signature Bank, under the same parameters.
“Americans can have confidence that the banking system is safe. (…) In my Administration, nothing and no one is above the law,” stressed the president, assuring that the taxpayer will not assume any loss.
(Calviño rules out a contagion effect in the Spanish financial system of the bankruptcy of the Silicon Valley Bank)
As collected efethe California-based SVB, announced last Wednesday that it was seeking a capital increase to try to cope with financial difficulties that had led it to dump some $21 billion worth of investments, at a loss of about 1.8 billion.
That announcement led many clients to withdraw their funds, after which regulators had to close the bank on Friday for lack of liquidity. The company’s stock price subsequently plunged, which in turn affected the banking sector in the United States and other countries.
(Silicon Valley Bank: The 48 Hours That Sparked America’s Biggest Bank Failure Since 2008)
The Treasury Department, the Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC) announced Sunday that customers will have access starting Monday to all money deposited in the SVB and promised a similar plan for the Signature Bank.
Biden advanced that the managers of these banks “will be fired” and stressed, as the regulators had pointed out the day before, that the shareholders will not be protected.
“If the FDIC takes over the bank, the people who run it should no longer work there. (…) Investors will not be protected. They knowingly took a risk and when the risk fails investors lose their money. This is how capitalism works,” he said.
His appearance tried to dispel the ghosts of the 2008 financial crisis.
“We must reduce the risk of this happening again,” stressed the president, recalling that under the administration of Barack Obama, also a Democrat (2009-2017), “tough demands” were put in place on the banking sector that fell back in that of Republican Donald Trump (2017-2021).
Therefore, he pointed out that will ask Congress and regulators to tighten the rules to reduce the chances of this type of collapse happening again and to protect jobs and small businesses.
“The bottom line is this: Our banking system is safe. Your deposits are safe. We will do what we have to do,” Biden added, making it clear that the money to take the losses of the SVB and Signature Bank will come from the fees that the banks enter the Deposit Guarantee Fund.
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