Biden says the banking system is safe after the Silicon Valley bank collapse

WASHINGTON — President Biden said on Monday that the banking system is safe while emphasizing steps have been taken to mitigate the fallout from the Silicon Valley Bank collapse and bolster confidence in the financial system, as some lawmakers called for a reexamination of the rules for medium-sized banks.

“The swift action of my administration over the past few days has given Americans confidence that the banking system is safe,” Biden said in televised remarks.

Mr Biden’s comments came a day after federal regulators announced emergency measures to guarantee all depositors money at Silicon Valley Bank after bankruptcy, instead of the standard $250,000 in insured deposits. Federal regulators said any losses to the government fund would be recovered in a special assessment against banks and the US taxpayer would not bear any losses.

Many lawmakers said they needed more information about the actions of the banks and regulators prior to the failures before seeking changes to banking rules. Democrats indicated they would seek to tighten regulations for medium-sized banks like the SVB and explore raising the insurance cap on individual accounts from its current $250,000 level. Some Republicans pointed the finger at Democratic policies that they say fueled inflation and led to the failure of the SVB.

Regulators took control of SVB on Friday and on Sunday said they had taken control of a second lender, Signature Bank, one of the main banks for cryptocurrency businesses. Officials took the extraordinary step of designating SVB and Signature Bank as a systemic risk to the financial system, giving regulators the flexibility to guarantee uninsured deposits.

The steps to bolster wavering confidence in the banking system were jointly announced Sunday by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp.

US equities rose higher after a turbulent morning, but bank stocks continued to fall as investors sought refuge in government bonds.

Officials from the Treasury Department and the FDIC held a briefing with senators on Monday, according to a Senate aide. Some had not been able to attend a similar call on Sunday. A Senate Republican on the call said it was nothing new and that regulators dodged the tough questions, but he declined to elaborate.

Mr Biden said deposits in SVB and Signature are safe and customers can access their funds from Monday and no losses are borne by the taxpayer. He said he would ask Congress and banking regulators to tighten regulations on banks to “make it less likely that bank failures like this will happen again.”

The bank failures have put a spotlight on the Trump administration’s deregulation efforts. In 2018, Congress passed legislation to release smaller lenders from some of the toughest regulations introduced after the financial crisis, including restrictions designed to limit the damage companies can do to the economy.

Notably, the legislation reduced the number of banks subject to enhanced Federal Reserve supervision by raising a key regulatory threshold to $250 billion in assets from a previous close of $50 billion. By raising the threshold, the new legislation gave regulators room to ease the burden on the SVB and other medium-sized companies.

Had it not been for the enlightened rules for such lenders, SVB’s capital position would likely have slowly eroded over time as the Fed raised rates. That likely would have prompted the company and its regulators to take earlier steps to put the lender on sounder financial footing before last week’s collapse, industry observers say.

Silicon Valley Bank, a tech-focused lender, collapsed last week after a run on deposits.



Senator Elizabeth Warren (D., Mass.) said the recent bank failures are “the direct result of leaders in Washington weakening financial rules,” and she called for the 2018 law to be repealed and deposit insurance rules changed. “Never again should large companies with billions in unsecured deposits expect or receive free government support,” she wrote in an op-ed in the New York Times.

Senator Mitt Romney (R., Utah) said he was in regular contact with the White House and with Democrats and Republicans on the House and Senate banking committees.

“I think it’s fair to say that the regulations or regulators haven’t given the warning that was needed,” he said in a call hosted Monday by Utah-based startup organization Silicon Slopes. He added that he believed the government and the Fed took the right steps to stop the contagion. “I can confidently tell you that we will become stable again, I just can’t tell you when,” he said.

Senator Tim Scott of South Carolina, the top Republican on the Senate banking committee, said he would hold both banks and regulators accountable.

“Building a culture of government intervention will not prevent future institutions from relying on government to get in after taking excessive risks,” said Mr Scott.

Republicans on the House Financial Services Committee held a conference call Monday to discuss the collapse of Silicon Valley Bank and concluded they did not yet have enough information from regulators to know what role Congress might play.

“We need more information from the regulators,” said Rep. Barry Loudermilk (R., Ga.), a member of the House Financial Services Committee. “What caused the collapse of the bank? Was it just bad management? Was it the investments?” He also wondered if regulators also shared some of the blame.

“We’re going to work together to see what we need to do to make sure we don’t have systemic problems in our banking system,” said California Representative Maxine Waters, the top Democrat on the House Financial Services Committee. She said revamped bank stress tests and changes to the limit on federal deposit insurance were among the topics she wanted to explore.

Representative Bryan Steil (R., Wis.), a member of the House Financial Services Committee, said the administration “is looking to shift the blame away from inflation and onto everything else, so they landed on this policy as the culprit”, referring to the 2018 law.

The Federal Reserve began raising interest rates last year to curb inflation. Rising interest rates depressed the value of SVB’s huge bond portfolio, just as startups drained their money faster than expected, leading to the bank’s crisis last week.

In his remarks, Mr Biden said investors in the bankrupt banks will not be protected and management will be replaced. He said they knowingly “took a risk and when the risk didn’t pay off, investors lost their money. That’s how capitalism works.”

A senior Treasury official said on Sunday that the moves did not constitute a bailout because stock and bondholders in SVB and Signature would not be protected. Policymakers are wary of the intervention being labeled a bailout, wanting to avoid comparisons with the bailouts of major banks linked to the 2008 financial crisis.

“We need to get the full accounting of what happened and why,” Mr Biden said, so “those responsible can be held accountable.”

Write to Sabrina Siddiqui at, Siobhan Hughes at, and Natalie Andrews at

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