The U.S. government took steps Sunday to stop a potential banking crisis after the historic failure of Silicon Valley Bank, assuring depositors at the failed financial institution that they would make sure people had access to their funds.
In a press briefing Sunday, he said that Silicon Valley Bank and Signature Bank worked with the Treasury Secretary and the National Economic Council Director and they "reached a prompt solution that protects American workers and small businesses, and keeps our financial system safe. The solution also ensures that taxpayer dollars are not put at risk."
On Monday morning, the President laid out the steps his administration had taken to ensure Americans that banking would be safe. The first step, he said, was reassuring all customers who had deposits in the bank that they would have access to their money.
"Second," he said, "the management of these banks will be fired. If the bank is taken over by FDIC, the people running the bank should not work there anymore. Third, investors in the banks will not be protected; they knowingly took a risk. And when the risk didn't pay off, investors lose their money. That's how capitalism works."
He added that his administration will look into how the situation occurred in the first place, and that he would work to strengthen Obama-era regulations that were put in place to prevent things like this from happening. Some of those regulations, he said, were rolled back during the Trump administration.
Jenny Surane, a Bloomberg finance reporter, explained on KMOX's Total Information AM what led to the collapse of these banks; she said it's something smaller regional banks have been dealing with for a while.
"In the past few years, they've seen deposits really soar, but they haven't seen a lot of loan demand. And so banks had a choice: they could plunge that cash into assets, like bonds and mortgage backed securities, or they could just sit on it," she said. "And in the cases where they decided to invest that into bonds, with the recent rapid rise in interest rates, those bonds have really lost a lot of value. And banks are now kind of dealing with the fallout of that."
Surane said the main emergency measure they wanted to come across to depositors was that they've removed the $250,000 limit on FDIC insurance. She added that just because it's mostly regional banks that are affected, that doesn't make the situation any less important.
"They still are really crucial components of the economy. And so it's important to pay attention here," she said. "They're regional banks, but they're really important to certain sectors, and Silicon Valley, you know, being a major lender to almost all — or half of all — US startups."
Hear more from Bloomberg reporter Jenny Surane:
Copyright 2023 KMOX (Audacy). All Rights Reserved.
Follow KMOX | Facebook | Twitter | Instagram
Listen on the free Audacy app.
Tell your smart speaker to play K M O X.
