Silicon Valley Bank: Biden says the US banking system is safe

President Joe Biden said the United States would do “whatever is needed” to support banks after a series of failures raised concerns about financial stability.

His comments came after the US insured all deposits at Silicon Valley Bank and Signature Bank, which collapsed last week.

The US is trying to stop people from taking money out of banks after the collapse of the SVB amid a rush of withdrawals.

Biden said Americans should “rest assured that our banking system is safe.”

He said that people and companies who have funds on deposit with SVB will be able to access all their funds from Monday.

Taxpayers will not suffer any losses from the move, which extends protection beyond $250,000 (£205,000) in deposits that would normally be insured by the government. Instead, the cost would be funded by the regulators of fees imposed on banks.

Biden spoke early Monday, as the failure of SVB — the nation’s 16th bank — and Signature raised fears of a broader financial crisis.

“Let me also assure you that we will not stop there. We will do whatever is required.”

SVB – which specializes in lending to technology companies – was shut down by regulators who seized its assets on Friday. It was the biggest failure of a US bank since the financial crisis of 2008.

This came after SVB was scrambling to raise funds to bridge a loss from selling assets affected by high interest rates. Word of the problems led to customers racing to withdraw money leading to a cash crunch.

Also on Sunday, authorities said they had taken over Signature Bank of New York, which had several clients involved in cryptocurrencies and was seen as the institution most likely to be involved in similar banking operations after the SVB.

There is concern that the failures, which come after the collapse of another bank, Silvergate Bank, last week, are a sign of problems at other companies.

US financial markets were nearly flat in early trading on Monday.

But the shares of many banks have come under pressure. Shares in San Francisco-based First Republic Bank fell nearly 70% on Monday before trading halted, as investors sold shares, worried what might be the next move.

As part of their moves to restore confidence, regulators have unveiled a new way to give banks access to emergency funds, making it easier for banks to borrow from them in times of crisis.

Paul Ashworth, chief North America economist at Capital Economics, said US authorities “acted aggressively to prevent the spread of infection”.

“Logically speaking, this should be enough to prevent any infection from spreading and closing more banks, which can happen in the blink of an eye in the digital age. But infection has always been about irrational fear, so we maintain that there is no guarantee,” he added. This will work.”

The measures have also reignited debates about what the government should do to regulate and protect banks that erupted in the aftermath of the 2008 financial crisis.

Biden has called for tougher regulation and stressed that investors and bank leaders will not be left behind.

“They took a risk on purpose, and when the risk doesn’t pay off, the adjusters lose their money. That’s how capitalism works,” he said.

Still, Republican Sen. Tim Scott, who is seen as a potential presidential candidate in 2024, called the bailout “problematic.”

“Building a culture of government intervention does nothing to prevent future institutions from relying on government to prey on them after taking excessive risks,” he said.

SVB began as a bank in California in 1983 and has expanded rapidly over the past decade as the technology sector has boomed. It was an important lender to early-stage companies in the industry, and was the banking partner for nearly half of the US-backed technology and healthcare companies that listed on stock markets last year.

The company came under pressure last year, as its customers were increasingly dependent on deposits because high interest rates made it difficult to bring in new money through private fundraising or stock sales.

The disclosure prompted an acceleration of withdrawals, while raising concerns that other banks with large amounts of money tied up in bonds could face potentially large losses.

Central banks around the world – including the Federal Reserve and the Bank of England – have sharply raised interest rates as they struggle to stabilize soaring prices.

These moves have reduced demand for lower-yielding bonds, creating problems for holders, such as SVB, if conditions force a sale.

In Silicon Valley, echoes of the crash have spread far and wide as companies face questions about what it means for their finances.

Etsy and Roku were among the big-name companies with money tied up in the bank.

Etsy said it will have to delay some payments to sellers as a result, but it expects it will soon be able to use other payment partners.