Biden Says U.S. Banking System Is Safe After SVB Collapse

On March 13, 2023, President Joe Biden assured the public that the U.S. banking system is secure after the collapse of Silicon Valley Bank (SVB) last Friday, promising to do whatever is needed to prevent any additional bank failures. In his address, Biden stressed the actions taken by his administration to shore up the U.S. banking system in the wake of SVB’s collapse, including facilitating the purchase of SVB’s assets and overseeing the transfer of bank ownership to protect billions of dollars in uninsured deposits. SVB’s collapse is the second-largest bank failure in U.S. history and the largest since the 2008 financial crisis.

SVB was a commercial bank that specialized in technology startup banking and provided financing for almost half of the U.S. venture-backed technology and health care companies. It had $209 billion in total assets as of the end of 2022 and was among the top 20 U.S. commercial banks, according to the Federal Deposit Insurance Corporation (FDIC). SVB’s latest annual report revealed the bank had $151.5 billion in uninsured deposits by the end of 2022.

Over the weekend, the Biden administration took drastic action to secure the U.S. banking system in response to fears that depositors would rush to withdraw funds from regional and community banks, leading to systemwide risks and failures. Actions taken by the Biden administration include the following:

• Backstopping SVB depositors’ funds, including uninsured deposits, and ensuring depositors would have access to their funds starting on March 13, 2023
• Guaranteeing taxpayers would not have to shoulder any of SVB’s losses
• Promising the federal government would not bail out SVB
• Holding accountable those individuals responsible for SVB’s collapse
• Refusing to provide relief to SVB shareholders
• Investigating how SVB’s collapse happened and taking steps to ensure similar failures do not happen in the future

“Americans can rest assured that our banking system is safe, your deposits are safe.” President Biden

Biden also expressed his administration’s commitment to protecting small businesses and workers in the wake of SVB’s collapse. Instead of sourcing funds from U.S. taxpayers to protect SVB uninsured deposits, the money will come from FDIC bank fees. Additionally, he asked Congress and regulators to strengthen banking rules to help prevent similar banking failures from occurring in the future.

What’s Next?

While the impact of SVB’s collapse is still being assessed, Biden administration officials believe the broader U.S. banking system is secure, as SVB’s portfolio was unique and its issues were likely isolated. However, officials are monitoring several banks that could be on the verge of failure. For example, regulators seized Signature Bank over the weekend, and First Republic secured additional financing to improve its liquidity.

Employers who may be impacted should stay tuned for updates from Strategic Services Group. We will keep you apprised of any notable updates.