On Friday President Joe Biden attempted to assuage the fears of investors, assuring the nation that the American banking sector is not going to explode, adding however that it will take some time to resolve the present difficulties the banking sector is experiencing.
Biden went on to assert US lenders were in pretty good shape, and noted the government was putting all of its effort into containing the damage from the recent strings of bank failures.
Although he admitted the crisis was not over, and that it would take some time to stabilize the situation, he denied that the near-collapse of Swiss banking giant Credit Suisse, and the need for it’s larger competitor UBS to buy it out, was precipitated by events in the United States.
At a news conference in the Canadian capital of Ottawa, he told reporters, “I think we’ve done a pretty damn good job. People’s savings are secure. I think it’s going to take a little while for things to just calm down, but I don’t see anything that’s on the horizon that’s about to explode.”
Earlier this month, the nation’s 16th biggest lender, Silicon Valley Bank, was seized by regulators after it suffered a liquidity crisis amid a surge of outflows which threatened to collapse the bank. It was the second-biggest bank failure in US history, and the largest US bank failure since the 2008 financial crisis. Just days later the nation saw its third largest bank failure when crypto-focused lender Signature bank was seized by regulators in New York amid a run on deposits.
Since then, to shore up confidence in the banking sector, the Federal Reserve announced a new Bank Term Funding Program, which offers banks loans for up to a year, which will enhance liquidity and offer some measure of security to depositors in the event their bank encounters liquidity issues. The new system will allow both secured and unsecured depositors full access to their money using a special fund from the Federal Deposit Insurance Corporation (FDIC). The Federal Reserve also eased the rules regarding the access banks have to its discount window, which offers shorter term loans using bank assets as collateral.
Biden added that if other banks begin to fail, his administration would support tapping the FDIC insurance fund to protect deposits above the normal $250,000 cap.
He said, “If we find that there’s more instability than appears, we’d be in a position to have the FDIC use the power it has to guarantee those loans above $250,000 like they did already.”
