Following the failure of two US banks, Silicon Valley Bank and Signature Bank, US President Joe Biden stated on Monday (local time) that the American banking system is safe.
“Small businesses across the country that had accounts at Silicon Valley Bank and Signature Bank can breathe easier knowing they’ll be able to pay their workers. It won’t cost taxpayers a dime. This is paid for with the fees that banks pay into Deposit Insurance Fund,” said Biden. However, the failures have nonetheless created concern among customers who hold their money in other similarly-sized banks.
On Friday, US regulators shut down Silicon Valley Bank after it experienced a traditional bank run, in which depositors rushed to withdraw their funds all at once. It is the second largest bank failure in US history, trailing only Washington Mutual’s failure in 2008.
Regulators announced that New York-based Signature Bank had also failed, demonstrating how quickly the financial bleeding was occurring.
Biden emphasised that the American banking system is “safe,” while outlining how his administration is working to prevent the collapse.
He blamed the previous US administration for the banking failure. Biden said, “During the Obama-Biden administration, we put in place tough requirements on banks like Silicon Valley Bank and Signature Bank, including Dodd-Frank Law, to make sure that the crisis we saw in 2008 would not happen again. Unfortunately, the last administration rolled back some of these requirements. I am going to ask Congress and banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure would happen again and to protect American jobs and small businesses.”
Meanwhile, there was a steady stream of customers withdrawing money from First Republic Bank in Studio City on Monday morning and moving it to larger banks.
This comes amid concerns about what will come next after the second and third largest bank failures in US history.
The pressure is primarily on regional banks that are a couple of steps smaller in size than the massive “too-big-to-fail” banks that helped bring the economy down in 2007 and 2008.
First Republic shares fell 62.6 percent despite the bank’s announcement on Sunday that it had strengthened its finances with funds from the Federal Reserve and JPMorgan Chase, according to ABC 7.
