"Americans can have confidence that the banking system is safe. Your deposits will be there when you need them," Biden said.
The managers of the banks will be fired, Biden noted, and investors will lose money. "They knowingly took a risk, and when the risk didn't pay off his adjusters lose their money. That's how capitalism works," he said.
Biden also promised new regulation after the biggest U.S. bank failure since the 2008 financial crisis. Some of the Dodd Frank law passed after that crisis to prevent a repeat was rolled back by Republicans under former president Donald Trump, he noted.
"I'm going to ask Congress and the banking regulators to
strengthen the rules for banks to make it less likely this kind
of bank failure will happen again, and to protect American jobs
as a small business," he said.
Biden faces a divided Congress, which could make passing
tougher new rules difficult. However, Republicans and Democrats
alike have criticized Silicon Valley's bank managers.
His economic team worked with regulators over the weekend on the measures, which included guaranteeing deposits in both banks, setting up a new facility to give banks access to emergency funds and making it easier for banks to borrow from the Federal Reserve in emergencies. The moves sent waves of relief through Silicon Valley but a relief rally was short-lived as the crisis tested confidence in the U.S. financial system and fears remained that the fallout would roil global markets in the week to come.
Bank shares in Europe and Asia sank on Monday before the U.S. market's opening, while U.S. stock index futures were down even as some investors bet on a pause in interest rate hikes by the Federal Reserve. S&P 500 futures were down 0.7% and appeared to take little comfort in Biden's remarks, which largely tracked his earlier written statement. The U.S. Federal Deposit Insurance Corporation on Monday said it had transferred all Silicon Valley Bank deposits to a newly created bridge bank and that all depositors would have access to their money beginning Monday morning.
DODD FRANK IN THE SPOTLIGHT
Rules introduced after U.S. banks sparked a global financial crisis in 2008 with aggressive mortgage lending were partially repealed in 2018 under former President Donald Trump. The changes to the Dodd-Frank Act, pushed by Republicans, raised the threshold at which banks are considered systemically risky and subject to stricter oversight to $250 billion from $50 billion. Silicon Valley bank had $209 billion in assets at the end of last year.
Biden, a Democrat, faces a divided Congress after Republicans took control of the House of Representatives in January, and new U.S. bank regulations could be a tough sell.
"The prospect of legislation in this polarized political world is very low," John Coffee, a professor at Columbia Law School, told Reuters.
"The real problem here is that banks that are holding illiquid loans or securities on a hold-to-maturity basis do not have to mark them down even though they have a market value well below their balance-sheet value. But when (SVB) sold some of these and revealed their loss, they created some panic."
Senator Tim Scott, a Republican from South Carolina who sits on the Senate's banking, housing and urban affairs committee, said it was important to bring markets to a "calm and orderly resolution," but warned against too much intervention. "Building a culture of government intervention does nothing to stop future institutions from relying on the government to swoop in after taking excessive risks," Scott said in a statement, adding he was committed to bringing accountability for the crisis. "We deserve to know what exactly happened and why," Scott said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ After SVB failure, US acts to shore up banking system confidence FACTBOX-Which companies are affected by SVB collapse? INSTANT VIEW-Bank stocks tank, markets rethink rate-hike path UPDATE 2-JPMorgan among suitors for SVB Financial in deal excluding SVB Bank- Axios SVB Financial mulls strategic options Signature Bank becomes next casualty of banking turmoil after SVB U.S. FDIC shifts SVB deposits to new bridge bank, names CEO ANALYSIS-Silicon Valley Bank's fall widens systemic cracks as cheap money vanishes ANALYSIS-SVB's lightning collapse stuns banking industry EXPLAINER-What caused Silicon Valley Bank's failure? GRAPHIC-S&P 500 Banks Index tumbles from SVB failure GRAPHIC-Unrealized gains (losses) on investment securities GRAPHIC-Silicon Valley Bank's failure is first since 2020 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Trevor Hunnicutt; Writing and additional reporting by Simon Lewis and Susan Heavey; Editing by Heather Timmons, Stephen Coates, Chizu Nomiyama and Nick Zieminski)
twitter.com/TrevorNews; Reuters Messaging: trevor.hunnicutt.thomsonreuters.com@reuters.net))