President Biden is trying to reassure Americans that their money is safe amid the collapse of Silicon Valley Bank. According to The Hill, Biden said on Monday that his administration will “do whatever is needed” to keep banks safe and ensure that people can access their deposits. The Treasury Department has also promised it would backstop all deposits at the banks beyond the $250,000 insured by law, which Biden claimed would not be covered by taxpayers but by the fees banks pay into the Federal Deposit Insurance Corp. (FDIC) fund.
Biden’s plan and promise is not going without criticism, however. Breitbart Economics Editor John Carney warned that having the FDIC guarantee deposits above $250,000 “has the potential to cause more panic and create more doubt in the market since it would look like the government is trying to brace for more significant problems.”
Carney explained that Silicon Valley Bank is very different from other banks in that 93 percent of their deposits were at levels too high to be insured by the FDIC. Silicon Valley Bank was responsible for holding billions of dollars for venture capitalists, and when that amount of money comes out of the bank in just one day, it’s “not something most banks can stand up against,” said Carney.
“Because you have to sell assets quite rapidly in order to try to pay the depositors… When you’re selling assets at a fire sale, you don’t get the best prices. So you take even bigger losses, which panics your depositors more…Management should have anticipated the flight-prone nature of their deposits because they’re very different than a standard bank’s deposits,” Carney explained.
Biden said that he is now asking Congress to strengthen regulations on the banking system after some measures were scaled back during the Trump administration. Biden is also promising to hold the managers of the failed banks responsible.