President Biden defended the stability of the US banking system on Monday morning after the stunning collapse of Silicon Valley Bank sparked fears of a major economic crisis.
“Thanks to the quick action of my administration over the last few days, Americans can have confidence that the banking system is safe,” Biden said. “Your deposits will be there when you need them.”
Biden’s speech came hours after federal regulators took extraordinary steps to bail out SVB and avert a meltdown in the banking sector.
In a joint statement on Sunday, the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said they were taking action “that fully protects all depositors” at SVB and another shuttered firm, Signature Bank in New York.
The Treasury Department designated both SVB and Signature Bank as systemic risks, clearing the way for the extraordinary measures.
The feds said all depositors at the banks would have access to all of their money on Monday and that “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.
Despite the preventative measures, bank stocks were hammered in premarket trading on Monday – with First Republic plunging 65% and PacWest Bancorp dropping 24%.The FDIC shut down SVB last week, marking a stunning downfall for a tech lender once favored by startups and venture capital firms.
The feds took control after SVB disclosed a $1.8 billion loss on its bond holdings, prompting spooked investors to stage a run on the bank and attempt to pull their deposits.
Prior to its collapse, SVB ranked as the 16th largest bank in the US, with approximately $209 billion in total assets. Its downfall was the second-largest bank failure of all time and the most significant since the US economy was in the midst of the Great Recession in 2009.