President Joe Biden sought to reassure jittery consumers and markets that the US financial system is on solid footing, promising to hold those responsible for the collapse of two banks to account and saying he would urge Congress to strengthen regulation of the banking system.
(Bloomberg) — President Joe Biden sought to reassure jittery consumers and markets that the US financial system is on solid footing, promising to hold those responsible for the collapse of two banks to account and saying he would urge Congress to strengthen regulation of the banking system.
“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” Biden said Monday at the White House after the collapse of Silicon Valley Bank and Signature Bank raised fears of a full-blown banking crisis.
The president said all customers who had deposits at both banks can “rest assured they’ll be protected and they’ll have access to their money as of today.”
Biden said no losses would be borne by taxpayers, that he would ask Congress to strengthen banking regulations and that those responsible for the banks’ collapses would be held accountable.
“Investors in the banks will not be protected,” he said. “They knowingly took a risk and when the risk didn’t pay off investors lose their money. That’s how capitalism works”
US authorities took extraordinary measures Sunday to shore up confidence following the bank failures, including a new backstop for banks that Federal Reserve officials said was large enough to guarantee the nation’s deposits. The collapse of SVB Financial Group last week is the second-largest bank failure in US history, stoking concerns about oversight of the industry.
Earlier: US Backstops Bank Deposits to Avert Crisis After SVB Failure
The announcement by the Federal Reserve and Federal Deposit Insurance Corp. came near the end of a frantic weekend that saw the collapse of the New York-based Signature Bank along with mounting concerns about spillover effects from SVB and Signature on other regional lenders and the broader economy.
A financial crisis would pose a major challenge to Biden ahead of the expected launch of his 2024 reelection campaign. Republicans have accused the president’s policies of fueling inflation, while some on the left have questioned the pace of the Fed’s rate hikes.
Read More: Biden Says Those Behind SVB Bank ‘Mess’ Will Be Held Accountable
In a statement Sunday, Biden indicated he would pursue efforts to “strengthen oversight and regulations of larger banks so that we are not in this position again.” But it’s unclear whether the divided Congress would approve sweeping new rules, or how much he would be able to do unilaterally.
In addiction to the deposit backstop, the FDIC said it would make whole “all depositors” at Signature Bank while resolving SVB in a way that “fully protects” all its depositors. The Fed also announced a programs that offered banks one-year loans on more favorable terms and relaxed terms for lending through its discount window.
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