President Joe Biden has now officially delivered public remarks about the collapse of Silicon Valley Bank, offering a stark contrast between the venture capitalists who fear mongered in the days after its failure.
“Americans can have confidence that the banking system is safe,” Biden said on Monday, three days after the largest bank collapse since 2008. “Your deposits will be there when you need them.”
Biden echoed the guarantee that the Treasury Department, Federal Reserve and FDIC made on Sunday: All of Silicon Valley Bank’s depositors will be made whole and have access to all their money, even what’s beyond the FDIC-insured $250,000. Basically, any individual customer or business client of the bank will have full access to the entirety of their funds.
In addition, the president said that the money for depositors would not be funded by the taxpayer.
“No losses will be born by the taxpayers,” he said. “Instead the money will come from the fees that banks pay into the Deposit Insurance Fund.”
As for bank shareholders and investors, Biden emphasized that there would be no bailout for them.
“Investors in the banks will not be protected,” the president said. “They knowingly took a risk and when the risk didn’t pay off, investors lose their money. That’s how capitalism works.”
Silicon Valley Bank’s issues began after announcing the company needed to raise billions of dollars in capital on Wednesday. The announcement caused panic in the tech industry. Founders and VCs who were customers of the bank eventually sparked a bank run with tens of billions of dollars being withdrawn from the bank.
Biden offered a stark contrast to the apocalyptic scenarios that some tech VCs were posting about on social media over the past few days.
“Where is Powell? Where is Yellen?” venture capitalist and Elon Musk associate David Sacks posted on Friday, referring to Federal Reserve chair Jerome Powell and U.S. Secretary of treasury Janet Yellen. “Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread.”
“YOU SHOULD BE ABSOLUTELY TERRIFIED RIGHT NOW — THAT IS THE PROPER REACTION TO A BANK RUN & CONTAGION,” tweeted Jason Calacanis, a VC and Sacks’ podcast co-host. “@POTUS & @SecYellen MUST GET ON TV TOMORROW AND GUARANTEE ALL DEPOSITS UP TO $10M OR THIS WILL SPIRAL INTO CHAOS.”
Silvergate, Signature Bank collapse not a sign of ‘contagion’
Some pointed to recent bank closures like Silvergate and Signature Bank, which was taken over by regulators on Sunday, as proof of a spreading problem.
However, Silvergate shut down days before Silicon Valley Bank. In addition, both Silvergate and Signature Bank had well-known, lingering issues for months related to the cryptocurrency-friendly nature of those two now-failed banks. And, according to Biden, depositors from those banks will be made whole as well.
Bank stocks plunged on the market on Monday. However, some of the hardest hit on the stock market, like First Republic Bank, told CNBC that they are just not seeing that many depositors withdraw their funds.
While the dust has far from settled, one thing we haven’t seen: Everyday Americans lining up at their local banks, trying to withdraw all of their money as some VCs warned.
According to the Federal Reserve, the median account balance for the average household in the U.S. is $5,300 – well within the up to $250,000 insured by the FDIC.
