President Joe Biden has now officially delivered public remarks on Silicon Valley bank collapsepresenting a stark contrast to the venture capitalists who feared promoting it in the days after its failure.
“Americans can have confidence that the banking system is safe,” Biden said He said(Opens in a new tab) On Monday, three days after the bank’s biggest collapse since 2008. “Your deposits will be there when you need them.”
Biden reiterated the guarantee made by the Treasury Department, the Federal Reserve and the FDIC Sunday(Opens in a new tab)All depositors of the “Silicon Valley Bank” will become full and have access to all of their funds, even beyond the $250,000 FDIC-insured amount. Basically, any individual or business customer of the bank will have full access to their entire funds.
In addition, the president said that the depositors’ money would not be funded by the taxpayer.
“The taxpayers will not bear any losses,” he said. “Instead, the money will come from fees paid by the banks into the Deposit Insurance Fund.”
As for bank shareholders and investors, Biden has assured that there will be no bailout for them.
“Investors in banks will not be protected,” the president said. “They took a risk on purpose and when that risk doesn’t pay off, investors lose their money. This is how capitalism works.”
The Silicon Valley bank’s issuances began after announcing the company’s need to raise billions of dollars in capital on Wednesday. The announcement caused a panic in the tech industry. Founders and venture investors who were clients of the bank eventually launched a stampede for the bank with tens of billions of dollars pulled from the bank.
Biden offered a stark contrast to the apocalyptic scenarios some tech capitalists have been posting on social media over the past few days.
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“Where’s Paul? Where’s Yellen?” Venture capitalist and David Sachs associate at Elon Musk to publish(Opens in a new tab) on Friday, referring to Federal Reserve Chairman Jerome Powell and US Treasury Secretary Janet Yellen. “Stop this crisis now. Announce that all depositors will be safe. SVB with one of the first four banks. Do it before they open on Monday or there will be contagion and the crisis will spread.”
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“You must be totally freaked out by now – THIS IS A PROPER BANK RUN & CONTAGION RESPONSIBILITY,” chirp(Opens in a new tab) Jason Calacanis, co-podcast host for VC and Sacks. “POTUS & SecYellen must get on TV tomorrow and guarantee all deposits up to $10 million USD or it will lead to chaos.”
Silvergate, signature bank collapse is not a sign of ‘infection’
Some pointed to the recent closure of banks such as Silverjet(Opens in a new tab) And signature bank(Opens in a new tab)which regulators seized on Sunday, as evidence of the spread of the problem.
However, Silvergate closed its doors days before the Silicon Valley bank closed. Additionally, both Silvergate and Signature Bank have had known and ongoing issues for months related to the crypto-friendly nature of these two now-failing banks. And, according to Biden, depositors from those banks will, too.
Bank shares tumbled in the market on Monday. However, some of the worst affected in the stock market, such as First Republic Bank, said CNBC(Opens in a new tab) They do not see that many depositors withdraw their money.
While the dust hasn’t settled yet, one thing we haven’t seen: Americans are lining up every day at their local banks, trying to pull out all their money some venture capitalists have warned.
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According to the Federal Reserve, the Mediator(Opens in a new tab) The account balance for the average family in the United States is $5,300 — within limits of up to $250,000 insured by the FDIC.
