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The Biden Administration assures that the "resilience" of the banking system will withstand the collapse of Silicon Valley Bank

2023-03-11T01:41:00.444Z


The bank's closure is the biggest bank failure since the 2008 financial crisis. Treasury Secretary Janet Yellen met with regulators on Friday and expressed confidence in the safeguard measures the country put in place more than a decade ago.


By Rebecca Shabad —

NBC News

WASHINGTON.—Officials in the Biden Administration argued Friday that safeguards enacted after the 2008 financial crisis will protect the US economy after the closure of Silicon Valley Bank.

Treasury Secretary Janet Yellen met with bank regulators on Friday to discuss the events of the past few hours and assured that the federal government is well equipped to handle the situation, according to the Treasury Department.

"Secretary Yellen expressed full confidence in banking regulators to take appropriate action in response, noting that the banking system remains resilient and regulators have effective tools to address these types of events," the department said in a statement.

[Federal Regulators Shut Down Silicon Valley Bank: Biggest Bank Fall Since 2008 Raises Fears of Financial Crisis]

Yellen met with senior officials from the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency.

Earlier this Friday, before Silicon Valley Bank's collapse was announced, Yellen told House lawmakers during a budget hearing that “there are recent issues that concern some banks that I'm monitoring very carefully.

And when banks experience financial losses, it is and should be cause for concern."

The president, Joe Biden, answered questions from the press this Friday after presenting the most recent data on employment in the US. He is accompanied by Cecilia Rouse, president of the Council of Economic Advisers (left), and Lael Brainard, director of the Economic Council National.

Evan Vucci/AP

During the White House briefing, one of President Joe Biden's top economic advisers compared the closure of Silicon Valley Bank to the 2008 financial crisis.

“Our banking system is in a fundamentally different place than it was a decade ago,” Cecilia Rouse, chair of the White House Council of Economic Advisers, told reporters.

“The reforms that were put in place back then really provide the kind of resilience that we would like to see.

So we have full faith in our regulators."

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When pressed further on the potential economic and financial consequences, Rouse said reforms implemented after 2008 included implementing stress tests for banks and other tools regulators can use to protect the banking system.

On Friday, the California Department of Financial Protection and Innovation took the reins and closed Silicon Valley Bank to protect deposits, naming the FDIC as its recipient.

The FDIC has formed a separate entity where all of the bank's insured deposits will be available Monday morning.

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The shutdown is the biggest bank failure since the 2008 financial crisis and the second-biggest on record after the fall of Washington Mutual during the general collapse of the industry, according to FDIC data.

Democratic Rep. Ro Khanna, whose district includes Silicon Valley, said Friday that he had contacted the White House and the Treasury Department to discuss the bank's failure.

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“I stressed the importance of doing all that is legally permissible and appropriate to support the Bank, which is critical to the tech and start-up economy,” he said on Twitter.

Rep. Eric Swalwell, another California Democrat, tweeted that he is working with his state counterparts to protect all depositors at Silicon Valley Bank (SVB), which as of late December was the 16th largest bank in the country.

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“We must ensure that all deposits that exceed the FDIC's $250,000 limit are honored.

Banking is about trust,” he said.

"If depositors lose confidence in the safety of their deposits of more than $250,000, then we're in trouble," Swalwell said.

The closing came after a tumultuous morning for the bank, during which trading in its shares was halted after they fell double-digits before markets opened.

That drop came on the heels of another drop of more than 60% on Thursday.

Worries about the SVB led Wall Street investors to divest other bank stocks.

Shares of other prominent West Coast lenders took a nosedive on Friday, including First Republic Bank, PacWest Bancorp and Western Alliance Bancorporation.

Source: telemundo

All news articles on 2023-03-11

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