Biden Says Saving Silicon Valley Bank Helped Economy ‘Breathe Easier’

Topline

Americans can “breathe easier” knowing the nation’s financial system is “safe,” President Joe Biden said Monday morning, in Biden’s first remarks since his administration rolled out measures to ensure uninsured customers at Silicon Valley Bank and Signature Bank, both of which failed over the weekend in the largest bank collapses since the Great Recession.

Biden speaks Monday at the White House.

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Key Facts

“We’ll do whatever is needed” to prove “our banking system is safe,” Biden said.

“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,” Biden added.

Biden reiterated that taxpayers won’t directly foot the bill for the plan financed by federal banking fees.

Biden previously threw his weight behind U.S. banking and financial regulators’ plan to back all deposits in a series of Sunday tweets, saying the Treasury, Federal Reserve and Federal Deposit Insurance Corporation acted at his “direction” to craft a plan that protected “workers, small businesses, taxpayers and our financial system” alike.

Not all experts agreed with the initiatives to save uninsured depositors, including Euro Pacific Capital economist Peter Schiff, who called the scheme a “mistake” that will “lead to even greater instability in the banking system and larger future losses” and the fall of “many more” banks in the future.

Stocks tanked during Biden’s speech, with the Dow Jones Industrial Average, S&P 500 and the tech-heavy Nasdaq each losing about 1%, with bank stocks leading declines.

Key Background

Financial regulators shuttered the Santa Clara-based Silicon Valley Bank on Friday shortly after a run on its deposits and a collapse in its share price as the company failed to quell investor fears. All executives at Silicon Valley Bank and Signature Bank will be fired, according to Biden. Silicon Valley Bank’s failure marks the largest bank closure since 2008 and the second-largest in U.S. history. Regulators also closed New York-based Signature Bank on Sunday, while crypto-focused Silvergate shut its doors Wednesday after it failed to recover from the impact of the collapse of its one-time client FTX, the crypto exchange founded by the disgraced former billionaire Sam Bankman-Fried.

Crucial Quote

“That’s how capitalism works,” Biden said Monday about equity stakeholders in the failed banks losing their investments while depositors in the same institutions were saved by the federal government.

Chief Critic

Sen. Elizabeth Warren (D-Mass.) took issue with Biden’s oversight of the pseudo-bailout to protect “billion-dollar crypto firms” in a Monday column in the New York Times, writing: “Regulators have said that banks, rather than taxpayers, will bear the cost of the federal backstop required to protect deposits. We’ll see if that’s true.”

Surprising Fact

Yields on 2-year U.S. Treasury notes fell to a six-month low Monday morning as the bond market priced in the increased likelihood that the Federal Reserve will pause interest rate hikes.

Biden Says Saving Silicon Valley Bank Helped Economy ‘Breathe Easier’—But Not All Experts Agree