President Joe Biden has officially issued a public statement about the collapse of a bank in Silicon Valley, in stark contrast to the risks capitalists feared in the days after the fiasco.
"Americans can have confidence that the banking system is safe," Biden said Monday, three days after the biggest banking crisis since 2008. "Your savings will be there when you need it."
Biden backs assurances from the Treasury, the Federal Reserve and the FDIC on Sunday that all Silicon Valley bank depositors will be reimbursed and have access to all of their money, even more than the $250,000 that the FDIC insures. Basically, every customer or banking company will have full access to the safety of their funds.
In addition, the president said that the money received from deposits will not be funded by taxpayers.
"Taxpayers will not lose," he said. "The money will then come from the fees the bank pays to the Deposit Guarantee Fund."
As for bank shareholders and investors, Biden has made it clear that there will be no way out for them.
The president said that bank investors will not be protected, they are obviously taking risks, and when they are not taking risks, investors are losing money. This is how capitalism works."
The Silicon Valley bank's troubles began after the company said on Wednesday it needed to raise billions of dollars. The announcement sent shock waves through the tech industry. Founders and investors who become clients of banks end up setting up a bank after receiving tens of millions of dollars from the bank.
Biden contrasts sharply with the apocalyptic scenarios that many tech investors have been posting on social media in recent days.
"Where's Paul? Where's Yellen?" Venture capitalist and partner of Elon Musk David Sachs tweeted on Friday, referring to Federal Reserve Chairman Jerome Powell and US Treasury Secretary Janet Yellen. "Stop this crisis now! Tell depositors they will be safe. Put SVB in top 4 banks. Do it before opening on Monday, otherwise there will be pollution and the crisis will spread," he said.
“Should stay for now. This is the correct answer to bank deposits and deposits,” tweeted Jason Calacanis, host of the VC and Sacks podcast. "POTUS and SecYellen need to get on TV tomorrow and guarantee over a $10 million deposit or someone's money is used!"
Some have pointed to recent bank closures, such as Silvergate and Signature Bank, which were seized by regulators on Sunday, as evidence of the infection problem.
However, Silvergate closed days ahead of Silicon Valley Bank. Additionally, Silvergate and Signature Bank have had known and ongoing issues with cryptocurrency, and these two now-failing banks have been running for months. And according to Biden, the investment of deposits in those banks will also end.
Shares of the bank fell on Monday. However, some of the stock market's hardest hit, such as First Republic Bank, told CNBC they don't see many depositors withdrawing their money.
While the dust hasn't settled, one thing we haven't seen is Americans lining up at the local bank every day trying to get all their money, many venture investors have warned.
According to the Federal Reserve, the average household balance in the United States is $5,300 on the $250,000 insured by the FDIC.