The Biden Administration’s Swift Action Avoided Economic Fallout After Silicon Valley Bank Collapse
What Happened?
Silicon Valley Bank, previously ranked as the 16th largest bank in the US, collapsed in just a few days. Rumors of its potential collapse quickly circulated on social media and messaging apps, leading depositors to withdraw an astounding $42 billion in a single day. On March 10th, regulators confirmed that SVB had indeed failed and the FDIC took over, marking the largest bank failure in the US since the 2008 financial crisis.
President Biden and Federal Financial Agencies Take Decisive Action
The Biden Administration and federal financial agencies took decisive action to protect Silicon Valley Bank depositors and avoid economic fallout.
In a joint statement released, the Department of the Treasury, Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) stated that depositors of Silicon Valley Bank would be able to access all their funds just one weekend after the bank’s collapse. They did this without using a single taxpayer dollar. Instead, they guaranteed deposits through the Deposit Insurance Fund, an emergency fund managed by the government that is funded with quarterly fees paid by financial institutions and interest on government bonds.
Biden highlighted that his priority was "protecting depositors, protecting the banking system, protecting the economic gains we have made together for the American people."
Biden Praised for Decision to Protect Depositors and Workers
The decision by regulators to protect all Silicon Valley Bank deposits safeguarded not only the bank but also its customers and workers who relied on the bank for their paychecks.
Sen. Alex Padilla (D-Calif.) said in a statement that the "decisive action taken by regulators to fully protect all Silicon Valley Bank deposits will ensure that millions of workers across the country will be paid on time — and it will limit the potential damage to California’s and the nation’s economy."
Rep. Jimmy Panetta (D-Calif.) echoed a similar sentiment in a statement, stating that the actions were necessary to protect not the bank but the bank's customers, who were put at risk through no fault of their own.
Investigation into Bank’s Failure
Reasons for the bank’s failure are under investigation. Some have pointed to President Trump’s decision to remove regulation on small to midsize banks back in 2018 as part of the collapse; they say the Silicon Valley Bank crisis could have been avoided if its mismanagement was not allowed to go unchecked.