by Ashley Murray, Georgia Recorder [This article first appeared in the Georgia Recorder, republished with permission]

March 13, 2023

WASHINGTON — President Joe Biden reassured Americans early Monday that their money is safe in U.S. banks, after a tumultuous weekend following the collapse of Silicon Valley Bank and a move by regulators to shut down a second lender.

Americans “should feel confident that their deposits will be there, if and when they need them,” Biden said during short remarks from the White House.

The Federal Reserve and the Treasury Department took what is being described as an extraordinary step Sunday night, ensuring that depositors of the California-based SVB and Signature Bank of New York would be able to access their money by Monday morning, even above the federally insured limit of $250,000.

“Treasury Secretary (Janet) Yellen and a team of banking regulators have taken action, immediate action, and here are the highlights,” Biden said.

“First, all customers who had deposits in these banks can rest assured they will be protected and they’ll have access to their money as of today. That includes small businesses across the country that bank there and need to make payroll, pay their bills and stay open for business.

“No losses, and this is an important point, no losses will be borne by the taxpayers,” he said.

Rather, deposits will be covered by an insurance pool that banks regularly contribute to, according to a joint decision Sunday by the Fed, Treasury and the Federal Deposit Insurance Corporation, the agency tasked with buoying confidence in the U.S. financial system.

The agencies further announced that shareholders and “certain unsecured debtholders” would not be protected and would be held responsible for losses, as required by law.

Biden reiterated the point Monday as he listed steps being taken by the government to avoid a further run on banks.

“Second, the management of these banks will be fired,” he said. “If the bank is taken over by FDIC, the people running the bank should not work there anymore. Third, investors in the banks will not be protected. They knowingly took a risk and when the risk didn’t pay off, investors lose their money. That’s how capitalism works.”

The administration will seek a “full accounting” of what led to SVB’s investors and depositors withdrawing what totaled to $42 billion Thursday, Biden said.

By Friday, federal regulators had seized the bank, causing the second-largest bank failure in U.S. history. The bank, the nation’s 16th largest, is headquartered in Santa Clara, California, and is known for its role in the tech boom.

On Sunday, the U.S. financial agencies announced that state regulators had shut down Signature Bank, which operates in New York, Connecticut, California, Nevada and North Carolina.

Signature had already been under the scrutiny of regulators for its rocky role in cryptocurrency banking.

The weekend upheaval stoked fears, as the banks were the largest to fail since the 2008 financial crisis.

Biden urged Americans to consider the “broader context” — a strong job market and low unemployment numbers — and said he will push Congress to enact regulations that were reversed during the Trump administration.

“During the Obama Biden administration, we put in place tough requirements on banks, like Silicon Valley Bank and Signature Bank, including the Dodd-Frank law, to make sure that the crisis we saw in 2008 would not happen again,” Biden said. But he said those rules were rolled back by the Trump administration.

“I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure would happen again,” he said.

In a joint statement Sunday, Democrats’ top Banking Committee lawmakers issued a joint statement praising the administration’s actions.

“As we work to better understand all of the factors that contributed to the events of the last several days and how to strengthen guardrails for the largest banks, we urge financial regulators to ensure the banking system remains stable, strong and resilient, and depositors’ money is safe. Americans should continue to be confident in their preferred financial institutions in their communities,” said Senate Banking Committee Chair Sherrod Brown, of Ohio, and the ranking member of the House Financial Services Committee, Maxine Waters, of California.

Brown, long a proponent of regulating the crypto market, expressed concern Thursday after Silvergate, a main lender to digital asset companies, announced it would be liquidating its operations.

In January, the Ohio lawmaker sent a letter to U.S. banking regulators warning that taxpayers could be on the hook if another financial collapse, similar to the 2008 crisis, were to occur.

“We cannot allow the banking system to lose public confidence again,” he wrote. “It is the responsibility of the financial institution and its investors, not taxpayers, for preventing a bank failure and absorbing losses that may occur during such a failure.”

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