U.S. President Joe Biden said he would call on Congress and bank regulators to strengthen rules for financial institutions in the wake of the Silicon Valley Bank (SVB) and Signature Bank collapses over the past week.
In remarks from the White House on Monday, Biden said the 2010 Dodd-Frank Act signed into law under former President Barack Obama (when Biden was vice president) created “tough requirements” for banks, which were subsequently weakened under the administration of former President Donald Trump.
Silicon Valley Bank and Signature Bank – with $209 billion and $110 billion in assets, respectively – mark two of the three biggest bank collapses in U.S. history, and both happened within days of each other. The largest collapse was Washington Mutual Bank, which failed during the Great Financial Crisis of 2008.
“We must get the full accounting of what happened and why those responsible can be held accountable,” Biden said. “In my administration, no one – no one is above the law. And finally, we must reduce the risk of this happening again. During the Obama-Biden administration, we put in place tough requirements on banks, like Silicon Valley Bank and Signature Bank, including the Dodd-Frank law to make sure that the crisis we saw in 2008 would not happen again.”
While the banks’ depositors will have access to all of their funds, senior management was removed, the federal banking regulators and Treasury Department said in their joint statement Sunday. Biden alluded to this in his remarks, saying the people running a bank taken over by the FDIC should no longer work there.
“Investors in the banks will not be protected,” he added. “They knowingly took a risk. And when the risk didn't pay off, investors lose their money. That's how capitalism works.”
The president also said taxpayers would not be responsible for the cost of bailing out the two lenders; instead, the FDIC’s Deposit Insurance Fund would be replenished with fees on banks.
New York Governor Kathy Hochul and New York Department of Financial Services Superintendent Adrienne Harris, who also spoke Monday following their state's move to shut down Signature Bank, similarly emphasized that taxpayers would not be responsible for the costs of the program.
“This is not a bailout,” Harris said.
Harris also pushed back against the idea that Signature was doomed because of its exposure to the crypto industry.
“Signature Bank had a broad depositor base, so this idea that it is a crypto-based bank is not an accurate one,” Harris said. “This is not about a particular sector in the cases of Signature Bank, but we moved quickly to make sure depositors were protected.”
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