A few days after the largest US bank failure since the 2008 financial crisis, US authorities are trying to calm investors with a series of measures. Because after the collapse of the Silicon Valley Bank (SVB), an American start-up financier, another bank, the Signature Bank in New York, is now shaking. The government in Washington promised on Sunday that all deposits with the two financial institutions involved would be protected.
US President Joe Biden said people should not worry about their deposits. He also announced the consequences for those who caused the unrest. The US banking system remains resilient and on solid foundations, according to a joint statement from the Treasury Department, Fed and Deposit Guarantee Schemes. The steps now taken are important measures to protect the US economy by strengthening public confidence in the US banking system. “The taxpayer will not incur any losses in connection with the resolution of Silicon Valley Bank,” the bank said. This also applies to the Signature Bank.
State-owned bank bailouts are out of the question
A senior finance ministry official stressed that the measures were intended to help savers, not to bail out the banks themselves, which had taken risks and had to bear the losses themselves. It’s not a situation like the 2008 financial crisis. Treasury Secretary Janet Yellen had previously ruled out a government bailout of the Silicon Valley Bank. The government intervened in this way during the financial crisis a few years ago, the minister said in an interview with CBS on Sunday. But she insisted, “We’re not doing that again.”
Biden stressed that the solution now found is about protecting American workers and small businesses and keeping the financial system safe. “The American people and American businesses can be confident that their bank balances will be there when they need them,” the Democrat said in a written statement from the White House on Sunday evening (local time). Biden announced Monday that he would comment on how to proceed to maintain a resilient banking system and protect the economic recovery. “I am determined to hold accountable those responsible for this mess and continue our efforts to strengthen supervision and regulation of larger banks.”
Uncertainty also in Europe
Founded in 1983, the SVB had seen huge cash withdrawals in recent days due to liquidity problems. An emergency capital raise failed. The SVB share was suspended on Friday after a price drop due to the acute emergency. Other banks also came under considerable pressure on the stock market. Fears of defaults in the banking sector increased again. The problems of the American banks also caused uncertainty on the European stock markets.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
