On Monday, President Joe Biden aimed to quell concerns about the stability of the U.S. banking system by taking quick action to secure the deposits of two recently closed banks. His objective was to prevent the fear of potential failures from spreading to other financial institutions and to reassure Americans of the system's strength.
Many people were concerned that the recent closures of Silicon Valley Bank in California and Signature Bank in New York, which handled the funds of numerous tech startups, could cause panic among customers and lead to the collapse of other banks. To address these concerns, President Biden gave a briefing at the White House on Monday.
Biden expressed his confidence in the actions taken by regulators, stating that all Americans should feel reassured that their deposits will be there when they need them. This swift action aimed to prevent a potential crisis from affecting the U.S. banking system and to assure the public of its strength and stability.
Biden emphasized that all customers can now feel at ease, as they will be able to access their funds and be protected. This move will allow businesses to continue operations and pay their bills and employees. Although the Federal Deposit Insurance Corporation typically insures deposits up to $250,000, the administration's actions will extend this safety net to all depositors. During a recent press briefing, President Biden addressed the issue of failed banks, reassuring the public that depositors' funds would be protected and noting that the fees required to do so would be paid by the banking industry rather than taxpayers.
Although depositors' funds will be protected, investors in the banks will not receive the same benefit. Biden noted that investors knowingly took a risk and, in the event of a failed bank, would likely lose their money, citing the fundamental principles of capitalism. Biden further stated that in the event of a bank failure, the management of the affected institution would be terminated, stating that those who oversaw the collapse should not be allowed to remain in their positions.
Regarding the recent bank failures, Biden alluded to an investigation to determine the causes, emphasizing the importance of accountability.
Biden pointed to regulations implemented during his tenure as Vice President during the Obama administration but rolled back during the Trump era. He pledged to ask Congress and regulators to strengthen banking rules to reduce the likelihood of bank failures occurring again.
Following the closure of California's Silicon Valley Bank on Friday, New York's Signature Bank was shut down by regulators on Sunday, marking the first significant bank failure in over two years. On Monday morning, market futures showed mixed results, with the Dow and S&P both experiencing a decline of 0.45% and 0.16%, respectively. In contrast, Nasdaq futures rose by 0.66%.
Some banks, however, were hit particularly hard during pre-market trading. For example, San Francisco's First Republic Bank saw its futures plummet by 65%, followed by West Alliance, which lost 61%, and PacWest Bancorp, which tumbled by 24%.
This article was produced and syndicated by Wealth of Geeks.