Tax money will not be used for failed banks, says Joe Biden.
US President Joe Biden has made it clear that taxpayers’ money will not be spent on depositors of collapsed Silicon Valley banks. In a televised comment from the White House, he said, the government is ensuring that depositors get their money back.
According to news agency AFP and Reuters, after the collapse of Silicon Valley Bank (SVB), President Biden once again assured the American people that the country’s banking system is safe and that the crisis that has arisen is under control.
“Americans can be confident that the banking sector is safe,” Biden said. You will get your deposit back if required.
However, in his televised comments, he made it clear that public tax money would not be used to refund Silicon Valley Bank deposits. He said, “Taxpayers will not bear any loss.”
Joe Biden also said, “The customers’ deposits will be returned from the insurance money that the banks keep against the deposits.”
Regulators acquired another bank after the collapse of SVB. The financial institution named Signature Bank is based in New York.
President Biden has called on Congress to pass tougher laws. He said the “tough” regulations were put in place after the 2008 financial crisis but were scrapped under his Republican predecessor, Donald Trump.
Action by regulators
Meanwhile, after the collapse of the Silicon Valley Bank, the authorities of the United States began to take emergency measures due to the risk of a major crisis in the financial sector. These measures are aimed at strengthening confidence in the country’s banking system.
However, while taking these measures, the authorities closed another bank.
Regulators said Silicon Valley Bank customers will be able to withdraw their deposits from Monday. Apart from this, an emergency fund has been created, so that banks can get money in case of urgent need. The Federal Reserve has also ensured that this money is readily available.
While these steps have brought some relief, concerns about risks in the banking sector remain. Many now doubt whether the US central bank, the Federal Reserve, will stick to its plan to raise interest rates as aggressively as it has been doing.
“We think the steps taken by the Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation will certainly remove the negative sentiment in the banking sector,” said Carl Schmotta, chief market strategist at Toronto-based Corp.
But he thinks what has happened will create more volatility, and investors are watching to see if any more problems arise as the Federal Reserve takes tougher steps.
Recently, New York-based Signature Bank was shut down by regulators as a quick move due to financial stress.
But shares of major financial institutions fell in Asian markets on Monday on concerns. These institutions include HSBC, Standard Chartered Bank, Japan’s Mitsubishi and Singapore’s DBS.
The Federal Reserve and other key central banks have raised interest rates to fight inflation. But a look at the measures taken by the Biden administration gives an idea of the pressure it has placed on the financial system and markets around the world.
Silicon Valley banks poured money into the startup economy on the cheap. But the risks involved made the bank particularly vulnerable. But its collapse has raised concerns that similar incidents could happen again.
Investors feel that the risks to the banking sector are not over as the Federal Reserve continues to raise interest rates.
The Fed’s next policy meeting is scheduled for March 21-22. Analysts of Goldman Sachs believe that they do not think that the interest rate will be increased in that meeting. The institution had earlier assumed that interest rates could be hiked by 25 basis points at the March meeting.
Depositors are protected
SVB’s collapse has left its small business customers worried about whether they will be able to pay their workers. The FDIC says it will only protect deposits up to $250,000. As of the end of 2022, 89 percent of the bank’s $17,500 million deposits are uninsured.
A US Treasury official said the measures taken would protect depositors as well as provide additional support to the broader banking system.
But officials and regulators are keeping an eye on the stability of the financial system.