President Joe Biden briefly addressed the nation Monday morning just before U.S. markets opened to head off a bank run and reassure depositors at Silicon Valley Bank that their money will be available if they want to withdraw.
He said bank managers should be fired, insisted taxpayers won’t have to help bail out SVB and Signature Bank, and celebrated job gains and low unemployment rates amid the second largest banking meltdown in US history.
“The bottom line is this – Americans can be assured that our banking system is safe,” the president said in his less than four-minute address.
Biden’s remarks delivered ahead of a trip to California on Monday morning were aimed at reassuring the nation after two banks collapsed days and minutes before U.S. markets opened at 9:30 a.m.
He said while depositors will be protected, investors will not, saying, “That’s how capitalism works.”
Bank stocks fell as much as 71% in pre-market Monday morning despite Biden’s efforts to calm investors and a plan to ensure all depositors can access their funds.
The priority for Republicans is that American taxpayers do not have to help raise these banks from their own graves, which the Biden administration has adamantly asserted will not happen.
“No loss will be borne by the taxpayers,” Biden said Monday morning.
“Instead, the money will come from fees that banks pay into the deposit insurance fund. Because of the steps our regulators have already taken, every American needs to be confident that their deposits will be there if and when they need them.
He also said: “The management of these banks will be fired. If the bank is taken over by the FDIC, the people who run the bank should no longer work there.
“Investors in banks will not be protected,” added the president. “They knowingly took a risk and when the risk didn’t pay off, investors lose their money.” This is how capitalism works.
SVB’s rapid fall on Friday is the second-biggest banking meltdown in history and raised fears of contagion in the banking sector amid the Federal Reserve’s steepest rate-hike cycle since the early 1980s.
Shares of First Republic Bank fell to $47.25 on Monday amid rampant fears of a banking rout when Wall Street opened trading for the first time since the closure of SVB and New York’s Signature Bank. York.
Treasury Department Secretary Janet Yellen said Sunday that the federal government will not bail out banks as it did with institutions during the Great Recession of 2008.
President Biden tried to help avert a banking crisis with remarks on Monday morning
Republicans want to make sure taxpayers don’t pay a dime and have sparked debate about the government’s role in helping the financial industry.
“I hope the president calms the waters,” Texas Sen. John Cornyn said Monday morning on Fox News. “There was no reason for people to panic.”
“Federal filing will protect people who file $250,000 or less,” the Republican lawmaker added. “I understand that this bank was investing for the long term and was not ready for the spike in interest rates caused by the increase in the Fed’s discount rate. But hopefully there will be a smooth transition to protect all depositors without taxpayers being able to foot the bill.
Biden’s remarks tried to bolster confidence in the banking industry after the White House guaranteed over the weekend that SVB and Signature Bank customers would be ‘whole’ and that ‘no loss will be borne by the taxpayer. “.
But investors feel the blood in the water, several US banks suffering early in the session. PacWest Bancorp shares fell 41%; Western Alliance Bancorp shares slipped 33%; and Bank of America shares fell 4%.
Regulators proposed a plan on Sunday to support depositors who have money at the SVB to help stem fears of a systematic panic that could lead to a run on other banks this week.
Depositors at SVB and Signature Bank in New York, which closed on Sunday, will have full access to their money starting Monday.
SVB is a tech-focused institution where many start-ups have kept their funds, while Signature is a popular funding source for cryptocurrency companies.
After shares of the country’s 16th largest bank fell 60% last week, there was a run on SVB that saw $42 billion in withdrawals in a single day on Thursday and a total collapse of the institution. Friday.
Lawmakers and financial experts said over the weekend that the only hope for SVB was for a last-minute buyer to come along on Sunday and rescue SVB before markets open on Monday.
The Treasury Department designated SVB and Signature as systematic risks, which allowed the Department to break up the institutions to “fully protect all depositors.”
The Federal Deposit Insurance Corporation (FDIC) deposit insurance fund will be used to help cover the availability of funds to depositors. Many were uninsured because there was a $250,000 cap on guaranteed deposits.
The Federal Reserve is also creating a new bank term funding program to protect institutions affected by market instability and the waves caused by the failure of the SVB.
Republicans oppose a bailout because they don’t want the burden to fall on U.S. taxpayers — even though it doesn’t appear the administration is considering that move.
“We’re not going to do it again,” Yellen said Sunday on CBS News of the potential for a 2008-era bailout. “But we are concerned about depositors and working to meet their needs.”
Florida Governor Ron DeSantis, who is expected to run in the 2024 GOP nomination race, suggested the meltdown was due to institutions’ increased distraction from diversity, equity and inclusion goals.
He often argues that these so-called ESG (environmental, social and corporate governance) efforts go too far.
“This bank, they’re so preoccupied with DEI and politics and all sorts of things, I think it’s really distracted them from focusing on their core mission,” he said in an interview with Sunday Morning Futures. from Fox News.
“We have such a jumble of federal regulations,” he added, describing the collapse as a failure of federal regulators. “We have a massive federal bureaucracy, and yet they never seem to be there when we need them to prevent something like this.”
Former South Carolina Governor and United Nations Ambassador Nikki Haley, who is running for the GOP presidential nomination, was among the first in the still-emerging Republican field to call for taxpayers not to be exposed to the SVB failure.
“Taxpayers absolutely should not bail out Silicon Valley Bank,” she said in a statement. “Private investors can buy the bank and its assets. It is not the responsibility of the American taxpayer to intervene. The era of big governments and corporate bailouts must end.
Republican 2024 presidential candidate Vivek Ramaswamy, founder and investor of a multimillion-dollar biotech company, also opposed a bailout.
“Silicon Valley Bank made some particularly bad management decisions,” he said in an interview with CNN on Sunday. “I don’t think we should be rewarding that kind of bad behavior, that kind of mismanagement.”
GOP Rep. Nancy Mace told CNN on Sunday that she wouldn’t support a bailout: “We can’t keep bailing out private companies because their actions have no consequences.” People who make mistakes or break the law must be held accountable in this country.
