President Joe Biden finally addressed the potential banking crisis after the failure of California-based Silicon Valley Bank on Sunday while boarding Air Force One.
“Over the weekend, and at my direction, the Treasury Secretary and my National Economic Council Director worked diligently with the banking regulators to address problems at Silicon Valley Bank and Signature Bank. I am pleased that they reached a prompt solution that protects American workers and small businesses, and keeps our financial system safe. The solution also ensures that taxpayer dollars are not put at risk,” Biden said.
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” he continued. “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.”
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The White House said it will release a more comprehensive statement later Monday.
There remains fears of a broader upheaval and bank runs that that would threaten the stability of the banking system and the economy as a whole.
U.S. regulators worked through the weekend to find a buyer for the bank, which had more than $200 billion in assets and catered to tech startups, venture capital firms, and well-paid technology workers.
While those efforts appeared to have failed, officials assured all of the bank’s customers that they would be able to access their money on Monday.
Meanwhile, the Bank of England and U.K. Treasury said early Monday that they had facilitated the sale of the bank’s London-based subsidiary to HSBC, Europe’s biggest bank, ensuring the security of 6.7 billion pounds ($8.1 billion) of deposits.
Regulators in the U.S. rushed to close Silicon Valley Bank on Friday when it experienced a traditional bank run, where depositors rushed to withdraw their funds all at once. It is the second-largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual.
In a sign of how fast the financial bleeding was occurring, regulators announced that New York-based Signature Bank had also failed and was being seized on Sunday.
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At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. Another beleaguered bank, First Republic Bank, announced Sunday that it had bolstered its financial health by gaining access to funding from the Fed and JPMorgan Chase.
The developments left markets jittery as trading began Monday. The Asian and European markets fell and U.S. markets started the day down.
In an effort to shore up confidence in the banking system, the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said Sunday that all Silicon Valley Bank clients would be protected and able to access their money.
“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.
Under the plan, depositors at Silicon Valley Bank and Signature Bank, including those whose holdings exceed the $250,000 insurance limit, will be able to access their money on Monday.
The U.K. also moved quickly, working throughout the weekend to arrange the sale of Silicon Valley Bank UK Ltd., the California bank’s British arm, for the nominal sum of one pound.
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While the bank is small, with less than 0.2% of U.K. bank deposits according to central bank statistics, it had a large role in financing technology and biotech startups that the British government is counting on to fuel economic growth.
Jeremy Hunt, the U.K. government’s Treasury chief, said that some of the country’s leading tech companies could have been “wiped out.”
“When you have very young companies, very promising companies, they’re also fragile,” Hunt told reporters, explaining the why authorities moved so quickly. “They need to pay their staff and they were worried that as of 8 a.m. this morning, they might literally not be able to access their bank account.”
He stressed that there was never a “systemic risk” to the U.K.’s banking system.
In the U.S., officials characterized their lending program as akin to what central banks have done for decades: Lend freely to the banking system so that customers would be confident that they could access their accounts whenever needed.
That will allow banks that need to raise cash to pay depositors to borrow that money from the Fed, rather than having to sell Treasuries and other securities to raise it.
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Silicon Valley Bank began its slide into insolvency when it was forced to dump some of its Treasuries at at a loss to fund its customers’ withdrawals. Under the Fed’s new program, banks can post those securities as collateral and borrow from the emergency facility.
The Treasury has set aside $25 billion to offset any losses incurred. Fed officials said, however, that they do not expect to have to use any of that money, given that the securities posted as collateral have a very low risk of default.
Though Sunday’s steps marked the most extensive government intervention in the banking system since the 2008 financial crisis, the actions are relatively limited compared with what was done 15 years ago.
The two failed banks themselves have not technically been rescued, and taxpayer money has reportedly not been provided to them.
Some prominent Silicon Valley executives feared that if Washington didn’t rescue the failed bank, customers would make runs on other financial institutions in the coming days. Stock prices plunged over the last few days at other banks that cater to technology companies, including First Republic and PacWest Bank.
The Associated Press contributed to this article