The American banking system is safe, Joe Biden told Americans and the world after the American Federal Deposit Insurance Corporation (FDIC) had to take control of two medium-sized banks – SVB and Signature Bank – last week.
The FDIC, the Treasury Department and the Federal Reserve announced Sunday night that anyone with bank deposits will continue to have access to their money.
The FDIC under normal circumstances only insures deposits up to $250,000, anything above that would fail without government action. Meanwhile, the government is not intervening to save investors or shareholders, even the leaders of the two banks will lose their jobs, Biden announced.
“The system is safe. The deposits will be there when you need them. Small businesses will be able to pay their workers and their bills. When we became aware of the problem on Friday, I directed my team to protect the interests of workers and businesses. The FDIC took control of the assets SVB Bank, and on Sunday also Signature Bank. All customers will be protected and will have access to their money from today.” the American president assured.
At the same time, he also asserted that the action will not be a burden on taxpayers, or that funds for the intervention will not be drawn from the budget. “The money will come from the contributions the banks pay into the deposit insurance fund. The management of both banks will be fired. If the FDIC takes over the bank, that kind of management cannot stay in it. Investors will not be protected. They took a knowing risk and it didn’t work out . Such is the nature of capitalism,” he said, adding that no one is above the law, so they will conduct an investigation into the causes of the collapse.
The previous administration relaxed the rules
Biden also believed that it would be necessary to reduce the risk of a recurrence of such events, recalling that under President Barack Obama, after the great financial crisis in 2008, new bank regulations were introduced, including the Dodd-Frank Act, which increased the requirements for capital reserves of banks.
“Unfortunately, the previous administration did away with some regulations,” Biden said, advocating that they be reinstated with the goal of restoring confidence in the system. Finally, he described the economic progress of the past two years and assured that he would not allow it to be destroyed.
In 2018, the Republican majority in Congress, working with the Donald Trump administration, passed legislation to loosen rules for banks with balance sheets between $50 billion and $250 billion, which experts warned at the time would increase systemic risks and the possibility of new crises. SVB, which primarily caters to technology companies in Silicon Valley, had $212 billion in assets.
Democratic Sen. Elizabeth Warren, who strongly opposed changing the law in 2018, said Friday that Republicans under President Trump have reduced bank supervision and capital requirements, contributing to the current situation. However, she did not explain that some of her Democratic colleagues in the Senate also participated in this.