Biden vows to hold “fully accountable” those responsible for the failure of Silicon Valley Bank


President Joe Biden said on Sunday that under his leadership, U.S. Treasury Secretary Janet Yellen and his top economic adviser Lael Brainard were working with financial regulators to ensure that households and businesses affected by the Silicon Valley Bank and Signature Bank bankruptcies would have access to their deposits, and he promised to hold those responsible accountable.

“I am pleased that they quickly came to a solution that protects American workers and small businesses and keeps our financial system safe. The solution also ensures that taxpayers’ money is not at risk,” Biden said in the statement.

“I am determined to hold fully accountable those responsible for this mess and to continue our efforts to strengthen supervision and regulation of larger banks so that we are not in this position again,” he added please.

Treasury officials briefed a bipartisan group of lawmakers from both chambers of Congress on Sunday night, and Biden plans to comment Monday about maintaining a “resilient banking system.”

The administration decided on Sunday to proceed with dramatic emergency measures to extend a federal backstop to all Silicon Valley Bank deposits to ensure access to all those funds by Monday, a senior Treasury official said.

The emergency action coincided with the announcement of a new Federal Reserve loan facility and came during a weekend of furious behind-the-scenes efforts within the U.S. government to address acute concerns about the plight of small businesses and individuals at risk of default. can access their money.

That also sparked a broader, more systemic fear that the failure to fund all depositors by Monday would spark a wider contagion that would spread across the banking sector. When the FDIC took control of the bank on Friday, it said it would pay customers their insured deposits on Monday, which only covers up to $250,000.

But there was a lot of money – and influence – at stake. The primary focus has been on attempting to address the plight of those who held uninsured deposits – many of which are smaller companies that would likely have to weigh mass layoffs in the event they were unable to access their money to make payroll.

CNN previously reported that the Federal Deposit Insurance Corporation solicited bids from other banks over the weekend to potentially buy Silicon Valley Bank.

But the Treasury official noted that “things moved very quickly” over the weekend and that the decision was made to “move early” and activate the systemic risk exception – a clue that offers more leeway to advance cash immediately. shooting to those who have deposits above the current threshold of $250,000 covered by FDIC.

The official said it would have been “quite difficult” for a potential buyer to go through SVB’s books, agree to buy the assets and be prepared to open on Monday. Instead, with federal regulators closely watching the clock before Asian financial markets opened, it was decided to pull the trigger on the government’s actions.

Yellen on Sunday instructed the Federal Deposit Insurance Corporation to guarantee that SVB customers will have access to all of their money starting Monday — an effort to ensure public confidence in the U.S. banking system, said Yellen, Federal Reserve Chairman Jerome Powell and FDIC Chairman Martin J. Gruenberg. in a joint statement.

Yellen said earlier Sunday that the government would not bail out the bank, with some lawmakers speaking out against such an idea.

“Let me be clear that investors and owners of systemic big banks were bailed out during the financial crisis, and we are certainly not looking,” Yellen told CBS News when asked if there will be a bailout. “And the reforms that have been made mean we’re not going to do that again.”

Yellen said she heard from savers all weekend, many of whom are “small businesses” and employ thousands. “I have been working with our banking regulators all weekend to design appropriate policies to address this situation,” said the finance minister, who declined to provide further details.

SVB collapsed Friday morning after a stunning 48 hours in which a bank run and capital crunch led to the second-largest financial institution failure in US history.

The chaos caused by high interest rates led to the old-fashioned bank run on Thursday, with savers deducting $ 42 billion from the SVB.

SVB provided financing to nearly half of the venture-backed technology and healthcare companies in the US. At the end of 2022, the bank said it had $151.5 billion in uninsured deposits, of which $137.6 billion was held by U.S. depositors.

While relatively unknown outside of Silicon Valley, SVB was among the top 20 U.S. commercial banks with total assets of $209 billion, according to the FDIC late last year. It is the largest lender to collapse since Washington Mutual collapsed in 2008.

Despite initial panic on Wall Street over the run on SVB, which sent the stock crashing, analysts said the bank’s collapse was unlikely to trigger the kind of domino effect that gripped the banking industry during the 2008 financial crisis.

Shalanda Young, the director of the White House Office of Management and Budget, stressed in a Sunday interview with CNN’s Kaitlan Collins that the US banking system as a whole is now “more resilient.”

“It has a better basis than before the financial crisis. That is largely due to the reforms that have been put in place,” Young said of “State of the Union.”

Democratic and Republican leaders were in talks with Treasury officials on Sunday night, as were many mainstream lawmakers, a source briefed on the conversation told CNN. House Speaker Kevin McCarthy and Senate Majority Leader Chuck Schumer expressed concern about systemic failure in the economy.

GOP Senator Mitt Romney of Utah acknowledged the goal of preventing panic when markets open Monday, but expressed concern about what would happen if action by federal regulators was not enough to stop further bank runs by Sunday evening.

Meanwhile, South Carolina Senator Tim Scott, a Republican on the Senate banking committee and a possible GOP presidential nominee, warned Sunday night against “building a culture of government intervention.”

“Building a culture of government intervention will not prevent future institutions from relying on government to get in after taking excessive risks,” Scott said in a statement. “I remain committed to accountability and responses to the American people, both from the banks and our regulators. We deserve to know exactly what happened and why.”

And ahead of the Biden administration’s extraordinary announcement on Sunday night, the collapse had sparked a bailout debate in Washington as lawmakers assessed the fallout.

California lawmakers unanimously agreed that the government should help find a buyer for the bank rather than bailing it out, two sources familiar with the Treasury Department’s briefing with them on Sunday told CNN. Punchbowl News first reported the Treasury’s briefing with the California delegation.

“Our first and foremost concern must be with the affected workers and their paychecks,” California Democratic Representative Adam Schiff told CNN in a statement.

South Carolina Republican Representative Nancy Mace told Collins in a separate “State of the Union” interview that she did not support a bailout “at this point,” but cautioned, “It’s very early days.”

“We cannot continue bailing out private companies because their actions have no consequences. People who make mistakes or break the law should be held accountable in this country,” she said.

Democratic Representative Ro Khanna, who represents much of Silicon Valley, said the Treasury Department needs to be more aggressive in making sure all savers at SVB have access to their money.

“The principle should be that all depositors are protected and have full access to their accounts by Monday morning,” Khanna told CBS News. Khanna also made it clear that investors and shareholders in SVB, headquartered in his district, should not be bailed out.

“I have no sympathy for the executives, no sympathy for the people who own shares there. But savers are protected,” he said.

Kevin Cramer, a member of the Senate banking committee, said he hoped the collapse of the SVB is “very local and we can handle it that way.”

“The problem is that we live in a very emotional time, where markets are emotional. The reference to social media as an accelerator, if you will, of some of that emotion, I think, can be problematic,” the North Dakota Republican told NBC News. “But I hope that the weekend brought some rest and certainly some strategy.”

This story and headline have been updated with additional reporting.


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