Silicon Valley Bank bankruptcy: Joe Biden wants to reassure Americans
United States President Joe Biden wanted to reassure his people Monday morning during a short press briefing.
A few days after the fall of Silicon Valley Bank (SVB), the largest financial institution to fail since the 2008 crisis, and the day after the takeover of Signature Bank, the American president spoke on Monday morning , essentially to reassure its citizens and maintain their confidence in the banking system of the United States.
Americans can be confident that their banking system is sound, Joe Biden said in a short five-minute press briefing.
Your deposits will be there when you need them. Small businesses across the country that have deposits in these banks can breathe easier knowing that they will be able to pay their employees and their bills.
He assured at the same time that his administration will act quickly to prevent this from happening again. In particular, he calls on Congress to strengthen regulation of the banking sector.
“We will not stop there, we will do whatever it takes .
—Joe Biden, President of the United States
As for what has already happened, the bankruptcies of SVB and Signature Bank, he guaranteed that American taxpayers will not have to pay for the losses – instead they will be taken care of by a trust fund. x27;insurance – and managers will be held accountable. No one is above the law, he said. As for investors, they will not be protected.
Investors have taken a risk and when that risk doesn't pay off, they lose their money. This is how capitalism works.
US authorities took control of the SVB last Friday. It is the most important bank to fail since the 2008 financial crisis, creating a wave of panic in the United States. According to its website, it provided banking services to nearly half of venture capital-backed technology and life sciences companies and more than 2,500 venture capital firms.
The main cause of its downfall is said to be the assumption of huge sums of money followed by the rapid rise in interest rates.
Rich in cash from many start-up companies, SVB did what most of its competitors do: it kept a small portion in cash, then invested the majority in long-term investments, such as treasury bills. . This type of investment promises modest but steady returns when interest rates remain low.
The SVB therefore found itself in deep trouble when the US Federal Reserve ( the Fed) began to raise its interest rates, as did the Bank of Canada and several other central banks over the past year, in order to counter the rise in inflation.
At the same time, the economic context caused the financing of emerging companies to decline, causing several SVB clients to start withdrawing their money. To meet these demands, the institution had to sell some of its investments at low prices.
Added to this is the fact that the Federal Deposit Insurance Corporation (FDIC), l he American agency responsible for guaranteeing deposits only insures amounts of $250,000 and less. A large proportion of SVB's customers had deposits exceeding this amount. Being therefore uninsured, these are the kind of investors who tend to withdraw their money when there are signs of turbulence.
When the SVB announced to losses last Wednesday, the technology industry panicked, and many customers withdrew their money from the bank.
The bank and its advisers tried, in vain, to find a buyer. The US authorities therefore officially took possession of the bank on Friday and entrusted its management to the FDIC.
With information from Reuters, cnn, and New Musical Express