President Joe Biden on Monday said the U.S. banking system is safe in the wake of the collapse of Silicon Valley Bank and Signature Bank. The banking failures caused concerns of broader contagion in the sector.
“Americans can have confidence that the banking system is safe,” Biden said before departing on a trip to the West coast. “Your deposits will be there when you need them.”
Regulators took action Friday to close Silicon Valley Bank after a bank run, which occurs when a large amount of customers attempt to withdraw funds at the same time. New York-based Signature Bank failed shortly after. The burden of the bank failures would not fall on American taxpayers, according to Biden.
“No losses will be borne by the taxpayers,” Biden said. “Instead, the money will come from the fees that banks pay into the Deposit Insurance Fund.”
As part of the government action to protect the banks’ customers, Biden said management “will be fired.” He also made clear that investors in Silicon Valley Bank and Signature Bank would not get the benefit of government protection.
“Investors in the banks will not be protected,” Biden continued. “They knowingly took a risk. And when the risk didn’t pay off, investors lose their money. That’s how capitalism works.”
Biden said his administration is investigating how the banking collapse happened in the first place and is asking Congress and regulators to strengthen regulations for banks to make sure a failure like this does not happen again.
The failure of Silicon Valley Bank is one of the largest in American history, second only to the failure of Washington Mutual during the 2008 financial crisis.
While Biden and other banking institutions attempt to assuage bank customers, the contagion is starting to spread. At the start of Monday’s trading day, shares in San Francisco’s First Republic Bank had fallen more than 65%. Meanwhile, Western Alliance Bancorporation dropped more than 80% and PacWest Bancorp fell more than 50%.
The Associated Press contributed to this report.