Biden Aims to Reassure Anxious Clients That US Banks Are Secure
All depositors in two recently failed banks will receive their money, the executives will be fired, and the financiers who made poor investment decisions will just have to accept the loss, said President Joe Biden on Monday in remarks that also served as a message for his 2024 presidential campaign.
“Americans can have confidence that the banking system is safe,” Before leaving for California to attend a political fundraiser and a meeting with foreign leaders, Biden said at the White House.
“Your deposits will be there when you need them,” Biden made the comment in reference to customers who had deposits in Silicon Valley Bank, which failed last week. The Federal Reserve, the Treasury Department, and the Federal Deposit Insurance Corporation (FDIC) announced over the weekend that deposits made with SVB and Signature Bank in New York, which failed over the weekend, would be refunded.
According to Biden, the bank’s managers and financiers who made investments won’t be given the same protections.
“The people running the bank should not work there anymore,” In regards to the bank’s investors, Biden said, they are out of luck and their money.
“They knowingly took a risk” Biden said. “Investors lose money when a risk does not turn out to be profitable. That is the way capitalism operates.”
Additionally, funds from an FDIC account funded by bank fees will be used to ensure that depositors are fully compensated, according to Biden.
“No losses will be borne by the taxpayers,” he said, adding that his administration is looking at ways to strengthen banking regulations loosened during former the government of President Donald Trump.
It wasn’t a gift from the White House that was used to protect depositors. It’s just the way the FDIC operates. Deposit insurance fees are paid by banks, and that money is used to ensure that customers are protected in the event that a bank fails.
However, Biden moved to reassure Americans that their money is ultimately protected as Wall Street and individual bank account holders grew concerned about a second collapse, which could trigger a run on deposits.
His cold comments about banking executives and investors also served as a political statement for a president who has positioned himself as the spokesman for the middle class and working class.
Wealthier clients and larger financial institutions like pension funds are also depositors in those banks. But in his remarks, he made a clear distinction between customers and the bankers and investors who gambled with other people’s money.
With the Troubled Assets Relief Program, which provided $442 billion to keep the financial services industry afloat and prevent a global financial catastrophe, the federal government intervened during the 2008 financial services industry crisis, which they largely brought on themselves by supporting subprime loans and other risky ventures.
The institutions were “too big to fail,” experts said at the time – meaning that even though the industry executives might have made bad decisions, allowing the companies to collapse would have collateral damage on taxpayers and customers who bore no blame for it.
The revelation that some of those same corporate leaders received sizable bonuses that year added to the resentment over having to foot the bill for the errors of high-paid executives.
In a report by the New York attorney general, it was found that more than 800 workers in TARP-funded companies received bonuses totaling more than $3 million for their 2008 employment years. Three of the financial institutions – Wells Fargo, Merrill Lynch and Citigroup – were actually losing money that year, but the executives got bonuses anyway.
The argument at the time was that the bonuses were needed to retain the “talent” needed to crawl out of the crisis, Critics argued that it was that same “talent” that got the industry and the country into such trouble.
Biden on Monday pledged to “get the full accounting” of how and why the recent banking collapses occurred. The Biden administration briefed members of Congress on the banking collapses over the weekend and planned another briefing for Monday morning.