(CNSNews.com) - "Tomorrow morning, I will deliver remarks on how we will maintain a resilient banking system to protect our historic economic recovery," said a statement released Sunday by the White House in President Joe Biden's name.
The statement noted that Biden had directed his Treasury Secretary and other economic officials to "address problems at Silicon Valley Bank in Santa Clara, California, a leading lender to tech startups; and at Signature Bank in New York, a leading lender to the crypto industry.
Federal regulators shut down both banks, prompting nationwide jitters about other regional banks, even though officials insist those jitters are unfounded.
"I am pleased that they reached a prompt solution that protects American workers and small businesses, and keeps our financial system safe," Biden said. The solution also ensures that taxpayer dollars New York are not put at risk."
Biden said he will hold people who are "responsible for this mess" fully accountable.
Biden spoke after Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and Federal Deposit Insurance Corporation Chairman Martin Gruenberg announced "decisive actions to protect the U.S. economy by strengthening public confidence in our banking system."
They announced that all depositors in the two banks -- including those who exceed the $250,000 limit for federally insured deposits -- will have access to all of their money as of today. But, they said, "no losses will be borne by the taxpayer."
On the other hand, bank shareholders and bond-holders will lose their money.
"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law," the statement said. "Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors."
Yellen, Powell and Gruenberg said the U.S. banking system "remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry."
'Clearly a concern'
Treasury Secretary Janet Yellen told CBS's "Face the Nation" on Sunday that when a bank with billions of dollars in deposits fails, as Silicon Valley Bank did, "it's clearly a concern."
"From the standpoint of depositors, many of which may be small businesses, they rely on access to their funds to be able to pay the bills that they have, and they employ tens of thousands of people across the country.
"We've been hearing from those depositors and other concerned people this weekend. So let me say that I have been working all weekend with our banking regulators to design appropriate policies to address this situation."
The solution, as noted above, is to make all of the banks depositors whole, not just those with accounts insured up to $250,000.
I can't really provide further details at this time.
"But what I do want to do is emphasize that the American banking system is really safe and well-capitalized. It's resilient," Yellen said. She said the goal of federal officials to is make sure that the problems at Silicon Valley Bank and Signature Bank "don't create contagion to others that are sound.
"And a goal always of supervision and regulation is to make sure that contagion can't -- can't occur," she said.
Yellen said there will be no taxpayer bailout of the two banks as there was during the financial crisis in 2008.
"Well, let me be clear that, during the financial crisis, there were investors and owners of systemic large banks that were bailed out. And we're certainly not looking, and the reforms that have been put in place means that we're not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs."
Rep. Ro Khanna (D-Calif.) told "Face the Nation" that the bailout of all depositors will not cost taxpayers money:
He said Silicon Valley Bank has the assets, but they lack liquidity.
"What happened is, they had these long-term Treasury bonds. And then the Fed hiked interest rates very, very fast. We can debate the wisdom of that. And they were -- this was the -- the cause. Those -- those assets still have value. We need the liquidity,” Khanna said.
"Now, there may have been mismanagement. And we can get into that. But, right now, the key thing is for the depositors to have access to those accounts."
According to the FDIC:
Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023.
The FDIC as receiver will retain all the assets from Silicon Valley Bank for later disposition. Loan customers should continue to make their payments as usual.
As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined.
Silicon Valley Bank is the first FDIC–insured institution to fail this year, followed by Signature Bank. Before those two, the last FDIC–insured institution to close was Almena State Bank, Almena, Kansas, on October 23, 2020.