
In the aftermath of the biggest bank failure since the 2008 financial crisis, and the subsequent shuttering of another bank, regulators and the president have assured Americans that their money is safe.
“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” President Joe Biden said after the collapse of Silicon Valley Bank and Signature Bank, Bloomberg and others reported.
The president said that he would ask Congress and 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.”
On Sunday, the New York State Department of Financial Services (DFS) placed Signature Bank into receivership with the Federal Deposit Insurance Corp. (FDIC). “Signature Bank is a New York state-chartered commercial bank and is FDIC-insured, with total assets of approximately $110.36 billion and total deposits of approximately $88.59 billion as of December 31, 2022, the DFS stated.
Signature’s collapse, the third largest bank failure in U.S. history, according to The Wall Street Journal, was caused by its betting on crypto banking and a crackdown on its lenders’ exposure to digital assets by banking regulators, the Journal reported.
The collapse is also the third significant bank failure within a week, The New York Times reported. Silicon Valley Bank was seized by regulators on Friday. Earlier last week, Silvergate, a California-based bank that made loans to cryptocurrency companies, ceased operations and said that it would would liquidate its assets.
Former U.S. Rep. Barney Frank (D-Mass.), co-author of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act, which overhauled financial regulation, is a member of Signature Bank’s board. “Digital currency was the new element entered into our system” unforeseen then, he told Bloomberg, and “[a] new and destabilizing—potentially destabilizing—element is introduced into the financial system. What we get are three failures.”
The FDIC established a new entity, Signature Bridge Bank, to open as normal on Monday, and customers will be able access all their funds and checks will clear, the Journal reported.
Biden added that taxpayers would not be responsible for the banks’ losses. “Investors in the banks will not be protected,” he said, according to Bloomberg. “They knowingly took a risk and when the risk didn’t pay off investors lose their money. That’s how capitalism works.”
The Federal Reserve Board “will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors,” Fed Chair Jerome Powell announced in a joint statement with Treasury Secretary Janet Yellin and FDIC Chair Martin Gruenberg.
Stock exchanges suspended trading on several midsize and regional banks, including PacWest Bancorp and First Republic Bank, The Washington Post reported. Stocks of Wells Fargo, Capital One and Bank of America were trading sharply lower.