President Joe Biden addressed the nation on Monday regarding the collapse of Silicon Valley Bank and reassured Americans that the US banking system remains safe. In his speech, Biden outlined his administration's actions to protect small businesses and workers, including backstopping depositors' funds, holding those responsible accountable, and declining to extend relief to investors.
Biden Outlines Actions to Protect Small Businesses and Workers
Biden stated that affected customers could access their money on Monday and that the management of the failed banks would be fired. The president also called for a full accounting of the situation and steps to ensure it never happens again, emphasizing that no one is above the law in his administration. He also called on Congress to restore banking regulations rolled back during the Trump administration.
Biden Calls for a Full Accounting of the Situation
The collapse of Silicon Valley Bank was caused by a bank run instigated by high-interest rates, leading to the withdrawal of $42 billion from the bank. Despite initial panic on Wall Street, analysts believe that the collapse of Silicon Valley Bank was unlikely to set off a domino effect like the 2008 financial crisis.
Analysts Believe Collapse of Silicon Valley Bank Unlikely to Set Off Domino Effect
Over the weekend, top administration officials were alarmed by the failure of Silicon Valley Bank and on high alert for the additional risk. They maintained a clear belief in the stability of the US banking system, but it became clear that the system was facing the threat of widespread contagion. Biden was briefed regularly by National Economic Council Director Lael Brainard and signed off on the plans presented by Treasury Secretary Janet Yellen.
Biden Briefed on the Situation and Signs Off on Plans
The US government will fully back the bank's uninsured deposits, and a Federal Reserve lending facility will launch to ease any liquidity squeezes. The administration's goal was to facilitate the purchase of Silicon Valley Bank's assets and oversee a clean transfer of ownership that protected uninsured deposits at risk. Private sector solutions were slow to form, leading to the deployment of dramatic emergency measures to freeze the spillover effects.
US Government to Fully Back Uninsured Deposits
Officials are optimistic that the efforts put into place will have the intended effect, and First Republic Bank secured additional financing from JPMorgan Chase & Co. However, First Republic Bank shares were still plunging in premarket trading on Monday. The portfolio makeup of Silicon Valley Bank is not widely shared across the banking industry and therefore remains isolated as long as there is broader confidence in the market.