Two U.S. banks collapsed in recent days. President Joe Biden insists the country’s banking system is safe. But the failures stirred fear among the public. Regulators offered emergency loans to stave off additional failures.
U.S. officials closed California’s Silicon Valley Bank on Friday. Before that, depositors had rushed to withdraw their funds all at once. It was the second largest bank failure in U.S. history behind the 2008 failure of Washington Mutual. New York-based Signature Bank also collapsed in the third-largest failure.
The President says he seeks to hold those responsible accountable. He pressed for better oversight of larger banks and promised that taxpayers would not bear any losses.
“Your deposits will be there when you need them,” President Biden says.
President Biden has suggested that managers of the failed banks should be fired. “If the bank is taken over by the FDIC, the people running the bank should not work there anymore,” he says. The FDIC is the Federal Deposit Insurance Corporation, the agency responsible for ensuring the stability of the banking system.
International regulators have also stepped in to ease investor fears, including banks in Great Britain.
Despite the President’s message, investors continue to unload shares of bank stocks.
Teacher Michele Barry visited Silicon Valley Bank yesterday. She says members of the FDIC and bank employees were there to answer questions. They told Barry that all checks from Friday would be honored. She left enough in her account to cover the payments but transferred most of her money over to another bank.
Barry finds President Biden’s reassurance helpful. “I’m from South Africa. Chances are if this happened in South Africa, nobody would insure your money,” she says.
New York bank regulators took possession of Signature Bank on Sunday. They ousted its leaders and handed day-to-day control over to the FDIC. That move allows the federal government to guarantee full deposits—even those over the $250,000 limit.
Sunday’s steps marked the most extensive government intervention in the banking system since the 2008 financial crisis. But the actions were fairly limited compared to 15 years ago.
The two failed banks themselves have not been rescued. The government has not provided them with taxpayer money.
New York Governor Kathy Hochul says her state’s decision to help is aimed at holding off a bigger crisis involving more banks. “Our view was to make sure that the entire banking community here in New York was stable,” she says.
Among the bank’s customers are a range of companies, including many California wineries and technology startups, both of which relied on Silicon Valley Bank for loans.
Tiffany Dufu is founder and CEO of a New York-based career coaching platform. She had her money tied up at Silicon Valley Bank.
Dufu says she had to pay employees out of her personal account. With two teenagers soon heading to college, she was relieved to hear that the government intends to pay off the debt.
“Small businesses and early stage startups don’t have a lot of access to leverage in a situation like this,” Dufu says. “We’re often in a very vulnerable position.”
As for the rich in this present age, charge them not to be haughty, nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy. — 1 Timothy 6:17
(President Joe Biden speaks about the banking system at the White House on March 13, 2023, in Washington, D.C. AP/Andrew Harnik)
