Joe Biden sought to reassure the public about the the health of the U.S. banking system on Monday, following the stunning downfalls of Silicon Valley Bank and Signature Bank.
“Americans can rest assured that our banking system is safe,” Biden said in a statement at the White House. “Your deposits are safe. Let me also assure you we will not stop at this; we’ll do whatever is needed.”
But the panic had clearly not yet abated. The stocks of some regional banks took big hits on Monday, including First Republic, whose shares were down more than 63 percent as of early afternoon (marking a 78 percent decline over the past month). Meanwhile, Bank of Hawaii was down 20 percent on Monday, while PacWest Bancorp had plummeted 29 percent.
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The government has guaranteed all deposits in Silicon Valley Bank and Signature Bank, with Biden saying that customers will “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,” Biden said.
The president also sought to distinguish the action taken by his administration to that of the approach taken by his predecessors in bailing out financial institutions in 2008. “This is an important point: No losses will be borne by the taxpayers,” Biden said. The government is using a pool of money that financial institutions had previously paid into to rescue the fallen banks, hence the distinction, though some observers still consider the intervention a bailout.
Biden further vowed to hold accountable those responsible for the banks’ collapses. “The managers of these banks will be fired,” he said. “No one is above the law.”
California regulators closed Silicon Valley Bank on Friday after depositors scrambled to withdraw their money. The panic started after the 40-year-old bank last week announced a major loss on a portfolio of bonds that spooked investors and, within 48 hours, SVB had collapsed—the largest bank failure since the 2008 crash. On Sunday, regulators also closed New York-based Signature Bank—the third biggest failure in the history of the U.S. banking system—as turmoil spread through markets in the wake of SVB’s collapse.
“They knowingly took a risk and when the risk didn’t pay off investors lose their money,” Biden said Monday. “That’s how capitalism works.” He also said he would ask Congress and bank regulators to bolster rules in order to “make it less likely this kind of bank failure would happen again.”
As Biden made his plea for calm, markets remained jittery on Monday morning, with stock futures falling and the price of gold spiking as investors looked for safe havens. The stocks of several banks, including First Republic, Charles Schwab and Bank of Hawaii, were halted Monday morning.
The fallout was also being felt in Europe, where shares took a beating. The British government announced on Monday that it had brokered a deal for HSBC to buy SVB’s U.K. business in a bid to protect the British tech sector.
Adversaries of the Biden administration have wasted no time in turning the crisis into political capital. “I don’t remember banks collapsing under Trump,” Donald Trump Jr. tweeted Sunday, apparently forgetting the FDIC’s reported 16 bank failures between 2017 and 2020.
Rep. Marjorie Taylor Greene (R-GA) took a different approach, contrasting the Biden administration’s swift action in response to the crisis with its perceived inaction over the train derailment in East Palestine, Ohio. “They give money to Silicon Valley Bank,” Greene tweeted. “They give money to Ukraine. But no money for East Palestine.”
Biden pushed back on some of the criticism on Monday, arguing that Donald Trump was partly to blame for Silicon Valley Bank's collapse because the former president had loosened regulations.
“During the Obama-Biden Administration, we placed tough requirements on banks to make sure the crisis we saw in 2008 wouldn’t happen again,” Biden's account tweeted. “Unfortunately, my predecessor rolled some of those back.”
