SVB collapse latest news: Biden says Silicon Valley Bank executives will be fired and system is ‘safe’

Fear is gripping Wall Street about what’s next to topple following the second- and third-largest bank failures in US history, and stocks are falling Monday as investors scramble to find someplace safe to park their money.

The S&P 500 was 1.1 per cent lower in early trading, with the heaviest losses coming from banks. Investors are worried that a relentless rise in interest rates meant to get inflation under control are approaching a tipping point and may be cracking the banking system and broader economy. The US government announced a plan late Sunday meant to shore up the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday.

The most pressure is on the regional banks one or two steps below in size of the massive, “too-big-to-fail” banks that helped take down the economy during the 2008 financial crisis. Shares of First Republic plunged 66.9 per cent, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase.

Bitcoin has seen a sudden price rebound at the start of the week, rising nearly 10 per cent in the space of a few hours after fears about a potential banking crisis subsided.

The world’s leading cryptocurrency briefly dipped below $20,000 on Friday – its lowest level since the start of the year – following the collapse of crypto-friendly Silvergate Bank and fears about Silicon Valley Bank appeared to spook investors.

Bitcoin rallied after the US government said it would protect customers’ funds, while banking giant HSBC agreed to buy the UK operations of SVB.

Ms Hochul said on Monday that the FDIC is in charge of Signature Bank and they’ll be “communicating any further … details about the future, but basically, the management has changed”.

“This is not a bailout of government taxpayer dollars,” she added. “This is simply using fees that are assessed on all banks by the FDIC” for “such a time they would need them so that money is there”.

She emphasized that “it’s not from the taxpayers” and added that “there’s new leadership” at the bank.

“So this is not continuing” with “the existing leadership that led the bank” into this situation.

Ms Hochul said on Monday that “people this morning waking up and deciding to take their money out of a bank because of uncertainty could lead others to flee regional banks”.

“And that would create incredible instability in a sector of the banking community that we think is critically important, and that would have had large ripple effects throughout the economy because these banks do hold deposits from small businesses and consumers, including those in the innovation economy, which is critically important to our lifecycle here in New York State,” she added.

New York Governor Kathy Hochul said on Monday that “the New York State Department of Financial Services took possession of a New York Chartered Bank known as Signature last night”.

“While that sounds extraordinary, that is what happens in terms of the transition from a temporary hold by the state and it’s merely turned over to the FDIC,” she said.

“And this all is in the aftermath of what happened on Friday … [with] Silicon Valley Bank out in California. And this had an effect on a bank here in particular Signature Bank,” she added.

Bank stocks plunge at the open on Wall Street following failures of two banks; investors seeking safety rush into bonds.

Mr Biden spoke of the possible measures being taken to prevent a similar crisis from happening again.

He spoke of the requirements put in place during the Obama-Biden administration, and he criticised the Trump administration for rolling some of them back.

“I’m going to ask Congress and the banking regulators to strengthen the rules for banks, to make it less likely this kind of bank failure would happen again,” Mr Biden said. “And to protect American jobs and small businesses.”

Mr Biden said on Monday that “investors in the banks will not be protected”.

“They knowingly took a risk. And when the risk didn’t pay off, investors lose their money. That’s how capitalism works,” he added.

Mr Biden emphasized that “no losses will be borne by the taxpayers. Instead, the money will come from the fees that banks pay into the Deposit Insurance Fund”.

“The management of these banks will be fired. If the bank is taken over by FDIC, the people running the bank should not work there anymore,” Mr Biden said.