U.S. President Joe Biden assured Americans on Monday that the U.S. banking system is secure and that taxpayers would not bail out investors at two banks that collapsed.
“Americans can have confidence the banking system is safe. Your deposits are safe,” Biden said in a five-minute statement delivered at the White House as businesses opened for the work week.
He said that all customers at the California-based Silicon Valley Bank and the New York-based Signature Bank would have immediate access to their deposits as federal financial officials take control of their operations.
“No losses will be borne by taxpayers,” Biden declared. “Managers of these banks will be fired. Investors in these banks will not be protected.”
He said customers’ deposits will be covered by funds banks routinely pay into a U.S. government-held account for such emergencies.
But he vowed, “We must get a full accounting of what happened” at the two banks.
He ignored reporters’ questions about the cause of the failures, but financial experts say both banks were affected by a rise in interest rates, which negatively affected the market values of significant portions of their assets, such as bonds and mortgage-backed securities.
Banks don’t lose money if they hold such notes until maturity. But if they must sell them to cover depositor withdrawals, as was the case in recent days, the losses can quickly mount.
The Federal Deposit Insurance Corp. reported that industrywide, U.S. banks at the end of last year reported $620 billion in such paper losses caused by rising interest rates.
In a statement late Sunday, Biden said, “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
The statement followed a meeting of officials from top financial regulators, and said the Federal Reserve, the country’s central bank, was also giving other banks access to an emergency lending program to provide additional stability to the wider banking system.
The FDIC, which insures deposits up to $250,000 and supervises financial institutions, said Monday it transferred all Silicon Valley Bank deposits to a so-called “bridge bank.” The new bank is run by a board appointed by the agency until it can stabilize operations.
The Bank of England also announced Monday the sale of Silicon Valley Bank’s United Kingdom subsidiary to HSBC to stabilize the bank, “ensuring the continuity of banking services, minimizing disruption to the U.K. technology sector and supporting confidence in the financial system.”
A Bank of England statement said all depositor money was safe and that Silicon Valley Bank U.K. would continue operating as normal.
The actions were prompted by the failure of Silicon Valley Bank, which U.S. regulators seized on Friday after concerns about the bank’s financial health led to a large number of depositors withdrawing their money at the same time.
With about $200 billion in assets, Silicon Valley Bank’s failure was the second largest in U.S. history. The bank was heavily involved in financing for venture capital firms, especially in the tech sector.
Signature Bank also had a large portion of clients in the tech sector, including cryptocurrency. Its failure, with more than $100 billion in assets, was the third largest in U.S. history, behind Washington Mutual and Silicon Valley Bank.
Some information for this story came from The Associated Press, Agence France-Presse and Reuters.
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