President of the United States, Joe Biden, announced on Sunday that he is determined to hold accountable those responsible for the situation that arose after the bankruptcy of SVB bank. He added that federal agencies and banking regulators are “urgently resolving” the problems that have arisen and that taxpayer money is not at risk.
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” Biden said in his statement on Sunday.
“I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again,” Biden wrote.
Over the weekend, his economic team collaborated with regulators on the steps, which included ensuring deposits in both banks, establishing a new facility to allow banks access to emergency money, and simplifying the process for banks to borrow from the Federal Reserve in times of need.
Silicon Valley experienced waves of relief after the decisions, but the relief rally was short-lived because the crisis put investors’ faith in the U.S. financial system to the test, and there were still concerns that the consequences might shake up the world’s markets in the next week.
All Silicon Valley Bank SIVB.O deposits have been moved to a newly established bridge bank, according to the U.S. Federal Deposit Insurance Corporation, which also announced on Monday that all depositors will have access to their funds as of Monday morning.
The standards put in place after U.S. banks used aggressive mortgage lending practices to start a worldwide financial crisis in 2008 may come under scrutiny in the coming days. Under previous President Donald Trump, they were partially abolished in 2018.
Republicans advocated for revisions to the Dodd-Frank Act that increased from USD 50 billion to USD 250 billion the amount at which banks are deemed systemically dangerous and are subject to more stringent regulation. At the end of the previous year, the Silicon Valley bank had USD 209 billion in assets.
As a result of Republicans taking control of the House of Representatives in January, Biden, a Democrat, must work with a split Congress and may find it difficult to pass additional restrictions for American banks.
John Coffee, a professor at Columbia Law School, told Reuters that there was very little chance of legislation passing in the current polarized political environment.
“The real problem here is that banks that are holding illiquid loans or securities on a hold-to-maturity basis do not have to mark them down even though they have a market value well below their balance-sheet value. But when (SVB) sold some of these and revealed their loss, they created some panic.”
Republican senator from South Carolina Tim Scott, a member of the Senate’s banking, housing, and urban affairs committee, emphasized the need for markets to reach a “calm and orderly conclusion” but cautioned against over-intervening.
“Building a culture of government intervention does nothing to stop future institutions from relying on the government to swoop in after taking excessive risks,” Scott said in a statement, adding he was committed to bringing accountability for the crisis.