On Sunday, President Joe Biden issued a statement concerning the failures of Silicon Valley Bank (SVB) and Signature Bank. In doing so, he assured the public that the US financial system was “safe” after the Federal Reserve rolled out an emergency lending program to stabilize the US banking system.
Furthermore, the Federal Deposit Insurance Corporation (FDIC) expanded its deposit insurance coverage at the two banks to ensure clients would not lose any deposited funds.
Biden said treasury secretary Janet Yellen and economic advisor Lael Brainard worked with banking regulators to mitigate any further financial risks from the bank failures.
Biden issues statement on bank failures
“I am pleased that 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”.
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” Biden added, promising to hold those “responsible for this mess” accountable.
US financial authorities acted promptly to plug any potential fallout from the failure of the two banks, which ignited fears of bank runs and even a broader economic collapse.
The FDIC has temporarily expanded its deposit insurance cover over and above the standard $250,000 limit, which will mean all depositors should receive their money back, “Depositors will have access to all of their money starting Monday, March 13,” the FDIC said in a joint statement with the Fed and the Treasury.
The same “systemic risk exception” will be adopted for Signature Bank, which will ensure all depositors will not lose any funds either, “All depositors of this institution will be made whole,” the FDIC said, adding that, as with SVB, “no losses will be borne by the taxpayer.”
Federal Reserve makes emergency liquidity available
Furthermore, the Federal Reserve has made special emergency liquidity available for institutions like banks, credit unions, and savings associations to ensure there is enough money on hand to meet the withdrawal requests of depositors, “The Federal Reserve is prepared to address any liquidity pressures that may arise,” they said in their statement.
The emergency liquidity called the Bank Term Funding Program (BTFP) offers loans to eligible institutions made against collateral like Treasurys and mortgage-backed securities under easier terms than the Fed typically provides.
“The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress,” the Fed said.