President Joe Biden has spoken publicly on the issue. The collapse of Silicon Valley Bankoffers a stark contrast to venture capitalists who fear begging in the days after their failure.
Biden: ‘Americans can be confident the banking system is safe’ Said(opens in new tab) Monday, three days after the biggest bank collapse since 2008.
Biden agreed to guarantees made by the Treasury Department, Federal Reserve Board and FDIC. Sunday(opens in new tab): All Silicon Valley Bank depositors will become whole and have access to all funds, even those above $250,000 insured by the FDIC. Essentially, the bank’s individual customer or business client has full access to the entire fund.
Additionally, the president said the money for depositors would not be funded by taxpayers.
“Taxpayers will not suffer losses,” he said. “Instead, the money comes from fees that banks pay to the deposit insurance fund.”
As for bank shareholders and investors, Mr. Biden stressed there would be no bailout.
“Bank investors are not protected,” the president said. “They take risks deliberately, and when the risks don’t pay off, investors lose money. That’s how capitalism works.”
Silicon Valley Bank’s troubles began after the company announced Wednesday it needed to raise billions of dollars in funding. The announcement caused panic in the tech industry. The founder and his VCs, who were bank customers, ended up causing a bank run that took tens of billions of dollars out of the banks.
Biden stood in stark contrast to the apocalyptic scenarios some tech VCs have been posting on social media over the past few days.
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“Where’s Powell? Where’s Yellen?” David Sacks, venture capitalist and associate at Elon Musk Posted(opens in new tab) I am referring to Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Janet Yellen on Friday. “Stop this crisis now. Announce all depositors are safe. Place SVB in the top 4 banks. Do this before Monday’s opening. So Otherwise, it will become contagious and the crisis will spread.”
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“You should be absolutely terrified right now — it’s an appropriate response to bank runs and contagion.” murmured(opens in new tab) VC and Sachs podcast co-host Jason Karakanis. “@POTUS and @SecYellen must be on TV tomorrow to guarantee all deposits up to $10 million or we’ll be in chaos.”
Silvergate, signature bank collapse not a sign of ‘contagion’
Some pointed to recent bank closures like Silvergate(opens in new tab) and signed bank(opens in new tab)was handed over to regulators on Sunday as evidence of a growing problem.
But Silvergate closed days before Silicon Valley Bank. Additionally, both Silvergate and Signature Bank, now insolvent, had months of well-known and lingering problems related to the crypto-friendly nature of the two banks. And according to Biden, these bank depositors will be perfected as well.
Bank stocks plunged in the market on Monday. But some of the stock market’s hardest-hit banks, like First Republic Bank, said: CNBC(opens in new tab) They just don’t see many depositors withdrawing their funds.
The dust is far from contained, but there’s one thing we haven’t seen. As some VCs have warned, everyday Americans are queuing up at their local banks to withdraw all their funds.
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According to the Federal Reserve, Median(opens in new tab) The average US household has an account balance of $5,300, well within the FDIC-guaranteed maximum of $250,000.
