Following the shutdown of the New York-based state-owned Signature Bank and California-based Silicon Valley Bank in a span of three days, US President Joe Biden said on Monday that investors in those banks will not be protected.
“Investors in the banks will not be protected, no one is above the law. They knowingly took a risk and when the risk didn’t pay off, investors lose their money. That’s how capitalism works,” said Biden.
Pres. Biden says those who invested in failed Silicon Valley Bank and Signature Bank will not be protected: “They knowingly took a risk and when the risk didn’t pay off, investors lose their money. That’s how capitalism works.” https://t.co/HWi82gAbJP pic.twitter.com/3hVKFJqmZt
— ABC News (@ABC) March 13, 2023
In an effort to reassure the US citizens that there is no need for panic after federal agencies stepped in following the failures of two big banks over the weekend, Biden added that no losses will be borne by US taxpayers following the collapse of Silicon Valley Bank and Signature Bank.
“Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed,” Biden said from the White House.
“Because of the actions that our regulators have already taken, every American should feel confident that their deposits will be there if and when they need them,” he continued. “Second, the management of these banks will be fired. If the bank is taken over by FDIC, the people running the bank should not work there anymore.”
“Third, investors in the banks will not be protected. They knowingly took a risk, and when the risk didn’t pay off, investors lose their money. That’s how capitalism works. And fourth, are important questions of how these banks got into the circumstance in the first place. We must get the full accounting of what happened and why those responsible can be held accountable,” he said.
President Joe Biden vowed to hold those responsible for bank failures “fully accountable”. Biden also said that he will speak about the US banking system on Monday and reassure Americans after the failures of Silicon Valley Bank and Signature Bank.
State regulators in USA shut down New York-based Signature Bank on Sunday, just two days after California authorities closed Silicon Valley Bank, marking the 3rd largest failure in US banking history. The shutdown is the result of the collapse of SVB Financial Group’s Silicon Valley Bank, with the economic meltdown spreading to other institutions.
The US Treasury Department and other bank authorities stated in a joint statement on Sunday that all Signature Bank depositors will be made whole and that “no losses will be borne by the taxpayer”.
The FDIC formed a “bridge” successor bank to Signature on Sunday, allowing customers to access their funds on Monday. Signature Bank depositors and borrowers will automatically become bridge bank customers, according to the FDIC. The regulator named Greg Carmichael as CEO of the bridge bank.
Signature’s fall came on the heels of Silicon Valley Bank’s failure on Friday, the greatest failure since Washington Mutual went bankrupt during the financial crisis in 2008. Washington Mutual remains the largest bank failure in American history.
