'That's how capitalism works,' Biden says of SVB, Signature Bank ...
U.S. President Joe Biden delivers remarks on the banking crisis after the collapse of Silicon Valley Bank (SVB) and Signature Bank, in the Roosevelt Room at the White House in Washington, D.C., U.S. March 13, 2023.
Evelyn Hockstein | Reuters
WASHINGTON — President Joe Biden sought to assure customers of Silicon Valley Bank and Signature Bank on Monday that their money was safe — insured by the Deposit Insurance Fund — but said investors in the failed banks' securities aren't going to get the same guarantee.
"Investors in the banks will not be protected," Biden said in a White House speech. "They knowingly took a risk and when the risk didn't pay off, the investors lose their money. That's how capitalism works."
The nation's top bank regulators on Sunday announced the Federal Deposit Insurance Corp. and Federal Reserve would fully cover deposits at both failed banks and rely on Wall Street and large financial institutions — not taxpayers — to foot the bill. Signature Bank in New York, which was shuttered Sunday over similar systemic contagion fears as SVB, had been a popular funding source for cryptocurrency companies.
"The FDIC on Friday took control of SVB's assets and over the weekend Signature's," Biden said. "All customers who had deposits in these banks can rest assured they will be protected and they'll have access to the money as of today."
The Treasury Department designated both SVB and Signature as systemic risks, giving it authority to unwind both institutions. The FDIC's Deposit Insurance Fund, not taxpayer money, will be used to cover depositors, many of whom had significantly more than the $250,000 deposited at the banks that is normally covered by the FDIC.
""No losses will be borne by the taxpayers," Biden stressed Monday. "I'm going to repeat that -- no losses will be borne by the taxpayers. Instead the money will come from the fees that banks pay into the Deposit Insurance Fund."
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Any losses to the Deposit Insurance Fund will be covered by a special assessment levied on federally insured banks, according to a joint statement issued by the FDIC, Federal Reserve and Treasury Department.
Senior management of the banks will be fired following the FDIC takeover.
"Americans can have confidence that the banking system is safe," Biden said. "Your deposits will be there when you need them."