President Joe Biden stated that the United States will do “whatever is necessary” to stabilize the financial system after a series of bank failures sparked concerns about the stability of the economy.
His remarks came a week after the United States guaranteed all deposits at Silicon Valley Bank and Signature Bank, which both failed.
After SVB failed due to withdrawals, the U.S. is trying to stop bank transfers.
![Silicon valley bank: biden asserts the us financial system is secure. Silicon valley bank: biden asserts the us financial system is secure.](https://i0.wp.com/creativemedia.news/wp-content/uploads/2023/03/Silicon-Valley-Bank.jpg?resize=694%2C418&ssl=1)
Mr. Biden stated that Americans should “rest assured that our banking system is secure.”
On Monday, he said, individuals and businesses with money deposited at SVB would have full access to their funds.
The measure, which extends protection beyond the $250,000 (£205,000) in deposits typically insured by the government, will incur no costs to taxpayers. The cost will instead be covered by fees charged by regulators to banks.
As SVB, the nation’s sixteenth-largest bank, and Signature collapsed, Mr. Biden spoke early on Monday.
“I can also assure you that we will not end here. We will do whatever is necessary.”
The assets of SVB, a bank that specialized in lending to technology companies, were seized by regulators on Friday and the bank was wound down. It was the largest US bank failure since the 2008 financial crisis.
SVB had to raise money to cover a loss from the sale of assets hurt by rising interest rates. As news of the problems spread, customers rushed to withdraw their money, resulting in a cash shortage.
Authorities announced on Sunday that they had seized Signature Bank of New York, which had a large number of crypto-related clients and was viewed as the institution most susceptible to a similar bank run after SVB.
The disasters that followed Silvergate Bank’s failure last week raise concerns about other firms.
Monday morning trading on U.S. financial markets was essentially unchanged.
However, many bank stocks were under duress. First Republic bank, headquartered in San Francisco, saw its stock plummet roughly 70% on Monday before trading was suspended, as investors dumped their shares out of fear that it could be next.
As part of their efforts to restore confidence, regulators have unveiled a new method for providing banks with access to emergency funds, making it simpler for banks to borrow from the fund during a crisis.
Elsewhere, HSBC announced that it would acquire the UK division of SVB for £1, while Canadian authorities seized the assets of SVB’s Canadian branch.
Paul Ashworth, the chief North America economist at Capital Economics, stated that the U.S. government “acted aggressively to prevent a contagion from spreading.”
“This should be sufficient to prevent any contagion from spreading and bringing down additional institutions. Which can occur in the blink of an eye in the digital age. “However, contagion has always been more about irrational fear, so we cannot guarantee that this will work,” he added.
The steps also revived debates over bank regulation after the 2008 financial crisis.
Mr. Biden advocated for stricter regulation and emphasized that investors and bank executives would not escape punishment.
“They took a calculated risk, and when the risk failed to pay off, his adjusters lost money. “This is how capitalism operates,” he stated.
Still, Republican Senator Tim Scott, a potential 2024 presidential candidate, described the rescue as “problematic.”
“Developing a culture of government intervention does nothing to prevent future institutions from relying on the government after taking excessive risks,” he stated.
SVB began as a California bank in 1983 and expanded significantly over the past decade, coinciding with the growth of the technology industry. It banked nearly half of US venture-backed technology and healthcare firms that went public in 2017.
Higher interest rates made it more difficult for the company to raise new capital through private financing or share sales, and as a result, the firm’s customers drew on deposits more frequently in the past year.
The disclosure accelerated withdrawals and raised fears that other banks with large bond investments could lose a lot.
To fight inflation, central banks like the Federal Reserve and the Bank of England have raised interest rates significantly.
These actions have decreased demand for bonds with lower yields. Which creates difficulties for bondholders such as SVB if circumstances necessitate a sale.
In Silicon Valley, the financial ramifications of the collapse have reverberated throughout the region as businesses ponder their future.
Etsy and Roku were among the well-known companies with funds in the bank.
Etsy stated that it would be forced to delay some payments to sellers as a consequence. But that it anticipated being able to use other payment partners shortly.