US President Joe Biden on Monday calmed an alarmed nation over the Silicon Valley Bank (SVB) collapse vowing to protect depositors' monies, fire the bank management, but declared investors would not be protected as they knew the risks they ran.
"This is capitalism for you," he said. Biden told a nationwide audience that the US government is taking steps to prevent an escalating financial crisis from the Californian bank collapse.
He said 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". "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," Biden said, according to multiple media reports. The US President said that "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 said. "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 would happen again... and to protect American jobs and small businesses," the US President said.
"Your deposits will be there when you need them. Small businesses across the country that have deposit accounts at these banks can breathe easier knowing they'll be able to pay their workers and pay their bills," he said.
This is the worst financial crisis to hit the US since the failure of the Washington Mutual Fund in 2008 during the start of the US financial meltdown.
Former US President Donald Trump was quick to take advantage of the situation and blame the democrats for watering down the financial regulations which Biden denied and shifted the blame to his predecessor.
According to the British newspaper Independent more than 200 UK firms are at 'serious risk' from the Silicon Valley Bank collapse. There is scramble on right now to secure Silicon Valley Bank UK's takeover amid fears for tech firms being hit hard.
The US financial regulators have said they will back the banks depositors but not bail out the bank by any chance. The Chinese HSBC has made a bid to buy SVB in a rescue deal, reports said.
The SVB collapse has created an atmosphere of uncertainty for major banks to flee from regional banks. New York Governor Hoi Chul (D), said the SVB could shutter Manhattan based banks as "people waking up this morning could decide to make a run and take their money out of the banks because of uncertainty that could lead others to flee regional banks".
Meanwhile, the New York State Department of Financial Services took over the Signature Bank. New York Governor Kathy Hochul said on Monday that "the New York State Department of Financial Services took possession of a New York Chartered Bank known as Signature last night".
"While that sounds extraordinary, that is what happens in terms of the transition from a temporary hold by the state and it's merely turned over to the FDIC," she said.
"This is in the aftermath of what happened on Friday... (with) Silicon Valley Bank out in California. And this had an effect on a bank here in particular Signature Bank," she added.
Following the SVB collapse, bank stocks plunged at the open on Wall Street as trading opened for Monday morning. Bank stocks plunged at the open on Wall Street following failures of two banks; investors seeking safety rush into bonds.
Meanwhile, Biden also emphasised that during the Obama-Biden administrations, strong regulations had been put in place, but the Trump administration rolled them back unfortunately. He was critical of Trump for this action.