Silicon Valley Bank: Biden says US banking system is safe

US authorities have taken urgent steps to strengthen the banking system after a string of bank failures raised concerns over financial stability.

The government said it would insure all deposits at Silicon Valley and Signature banks hijacked by authorities.

It hopes to stem the growing withdrawal rush that hit SVB last week.

President Joe Biden said Americans “should feel safe that our banking system is secure.”

He said people and businesses that have their money in the SVB will have access to all cash from Monday.

Taxpayers will not bear the losses from the move, which will be covered by the fees that regulators charge banks, he said. Bank executives will be fired, he added.

Biden spoke out early Monday morning after raising concerns that a failure to sign with SVB, the country’s 16th largest bank, could trigger a financial crisis.

SVB, which specializes in lending to technology companies, was shut down Friday after regulators seized assets. It was the largest US bank failure since the 2008 financial crisis.

This came after SVB scrambled to raise capital to cover losses from asset sales impacted by rising interest rates. Rumors of trouble caused customers to race to withdraw their funds, leading to a cash crisis.

Officials said on Sunday that they had acquired a New York signatory bank that was seen as the most vulnerable institution to a similar crackdown on banks after the SVB.

“Every American needs to be confident that their deposit will be there when they need it,” President Biden said. I’ll do anything.”

As part of the move to restore confidence, regulators have also announced new ways to provide banks with access to emergency funds.

The Federal Reserve said it would provide help through a new bank term funding program that makes it easier for banks to borrow during a crisis.

U.S. officials “acted aggressively to prevent the spread of the virus,” said Paul Ashworth, chief North American economist at Capital Economics.

“Rationally, this should be enough to prevent the contagion from spreading and destroying more banks. But contagion has always been about irrational fear. There’s no guarantee this will work.” he added.

I’ve been talking to people over the weekend who have their money stuck in SVB.

One founder told me he was constantly updating his online banking page in hopes of doing well.

Another admitted that he believed the government would intervene, but that he may have lost about 40% of the company’s cash overnight.

Therefore, this statement is welcomed by depositors. However, some frowned upon the move.

SVB primarily banked Silicon Valley start-ups and venture capitalists (the tech elite). And those Silicon Valley elites tend to have more than a streak of libertarianism in their politics.The stereotypical view is that government is slow and too big.

Critics argue that it is very ironic that it is the government that has intervened to save the crisis. Some may wonder if influential tech buddies are getting preferential treatment. Capitalism when it works, socialism when it doesn’t.

That is why the statement is so carefully written that the taxpayer will not bear this cost. Biden must now defend the move and reassure members of his party that the only way forward is to insure depositors.

SVB began as a California bank in 1983 and has expanded rapidly over the past decade. It is a key lender to early-stage companies in the tech sector and was a banking partner for nearly half of US venture-backed technology and healthcare companies that went public last year.

But rising interest rates put pressure on startups as it became harder for them to raise money through personal financing or sales sharing.

Elsewhere, HSBC said it would buy SVB’s UK unit for £1, while Canadian authorities temporarily took control of the assets of SVB’s domestic branch. The top banking regulator said it would seek permanent controls.

The Treasury Department said the deal with HSBC, which was stalled overnight before trading resumed on Monday, does not include taxpayer money.

Customers and businesses that were unable to withdraw their money will now be able to access it as normal.

In Silicon Valley, the impact of the collapse is far-reaching as companies face the question of what it means for their finances.

Etsy and Roku are among the well-known companies whose funds are tied up in banks.

“Supporting our sellers is a top priority at Etsy and we understand how important it is for these small businesses to be able to receive funding when they need it,” said an Etsy spokesperson. said on Sunday.

“We recently experienced delays in issuing payments to some sellers in connection with the unexpected collapse of Silicon Valley Bank. Our team is working around the clock to implement a solution. I’m in.

“We plan to make payments to our sellers through other payment partners in the next few business days and expect to be able to start processing these payments tomorrow, March 13th.”