Friday, March 24, 2023

Biden: Banking system safe, your deposits will be there when you need them, President Biden tells US citizens – Usky News

NEW YORK: President Joe Biden told US residents on Monday that the country’s financial system is strong after the swift and surprising collapse of two banks sparked fears of widespread turmoil.
“Americans can have confidence that the banking system is safe,” he said from the Roosevelt Room before traveling to the West Coast. “Your deposits will be there when you need them.”
United States regulators shut down Silicon Valley Bank After experiencing a traditional bank run on a Friday, where depositors rushed to withdraw their money in one go. It is the second largest bank failure in US history, behind only the 2008 failure of Washington Mutual.
In a sign of how fast the financial bleeding was happening, regulators announced that New York-based Signature Bank had also failed.
Speaking from the Roosevelt Room shortly before US markets opened, the president said he would like to hold those responsible and push for better oversight and regulation of big banks. And he promised that there would be no loss to the taxpayers.
Governments in the US and UK are taking extraordinary steps to prevent a potential banking crisis after the failure of the California-based Silicon Valley bank sparked fears of widespread turmoil.
US regulators worked through the weekend to find a buyer for the bank, which had more than $200 billion in assets and caters to tech startups, venture capital firms and well-paid technology workers.
While those efforts appeared to be failing, officials assured all of the bank’s customers that they would be able to access their money on Monday.
These assurances came as part of a wider emergency lending program aimed at preventing a wave of bank runs that would threaten the stability of the banking system and the economy as a whole.
Meanwhile, the Bank of England and the UK Treasury said on Monday they had facilitated the sale of the bank’s London-based subsidiary to Europe’s biggest bank HSBC, ensuring the safety of deposits worth 6.7 billion pounds ($8.1 billion). happened.
Regulators in the US rushed to shut down the Silicon Valley bank on Friday after it resembled a traditional bank run where depositors rushed to withdraw their funds in one go. It is the second largest bank failure in US history, behind only the 2008 failure of Washington Mutual.
In a sign of how fast the financial bleeding was happening, regulators announced that New York-based Signature Bank had also failed and was being seized on Sunday.
With over $110 billion in assets, Signature Bank is the third largest bank failure in US history. Another troubled bank, First Republic Bank, announced on Sunday that it has strengthened its financial health by receiving funding from the Fed and JPMorgan Chase.
The development sent shockwaves in the markets as soon as trading started on Monday. Asian and European markets fell but not dramatically, and US futures were down.
In an effort to boost confidence in the banking system, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp said on Sunday that all Silicon Valley bank customers would be safe and able to access their money.
“This step will ensure that the US banking system continues to play its important role of protecting deposits and providing households and businesses with access to credit that fosters 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 UK also moved quickly, working throughout the weekend to arrange the sale of the Californian bank’s British arm to Silicon Valley Bank UK Ltd for the nominal amount of one pound.
While the bank is small, with less than 0.2% of UK bank deposits according to central bank statistics, it has had a large role in funding technology and biotech startups, which the British government is counting on to spur economic growth. .
UK government treasury chief Jeremy Hunt said some of the country’s leading tech companies could be “wiped out”.
“When you have very young companies, very promising companies, they are also fragile,” Hunt told reporters. “They need to pay their employees and they were worried that as of 8 a.m. this morning, they literally won’t be able to access their bank accounts.”
He insisted there was never a “systemic risk” to the UK banking system.
In the US, officials described their lending program as similar to what central banks have been doing for decades: let the banking system lend freely so customers are confident they can access their accounts whenever they need them.
That would require banks to raise the cash to pay depositors instead of selling Treasuries and other securities to borrow that money from the Fed.
The Silicon Valley bank began its slide into bankruptcy when it was forced to dump some of its Treasuries 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 cover any losses. Fed officials said, however, that they do not expect they will have to use any of that money, noting that the risk of default in securities posted as collateral is very low.
Although Sunday’s moves marked the most sweeping government intervention in the banking system since the 2008 financial crisis, the action has been relatively limited compared with 15 years ago. The two failed banks themselves have not been saved, and taxpayer money has not been provided to them.
President Joe Biden said Sunday evening when he returned to Washington aboard Air Force One that he would talk about the situation on Monday.
In a statement, Biden also said he was “committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of large banks so that we will never see this situation again.” Don’t be in.”
Some prominent Silicon Valley executives feared that if Washington could not save the failing bank, customers would flock to other financial institutions in the coming days. Stock prices in other banks that cater to technology companies, including First Republic and PacWest Bank, fell over the past few days.
Among the bank’s clients are companies in the California wine industry, where many wineries rely on Silicon Valley Bank for loans, and technology startups dedicated to combating climate change.
Tiffany Dufu, founder and CEO of The Crew, a New York-based career coaching platform and community for women, posted a video on LinkedIn Sunday from an airport bathroom, saying the bank crisis was testing her resilience.
Given that his money was tied up in a Silicon Valley bank, he had to pay his employees from his personal bank account. To support the two teenagers who are going to college, she said she was relieved to hear that the government intended to make depositors whole.
“Small businesses and early-stage startups don’t have a lot of access to leverage in a situation like this, and we are often in a very vulnerable position, especially when we have to work so hard to get the wires into your bank. It took me a while to start the account, especially for me, as a black female founder,” Dufue said. , ragberry And Megarian reported from Washington. Sweet and Busewitz reported from New York. Associated Press Writers Hope Yen in Washington, Jennifer McDermott in Providence, Rhode Island and Danica Kirka in London contributed to this report.


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