US President Joe Biden considers it necessary to tighten rules for banks to reduce the threat of new bankruptcy. He expressed this in a televised address to the nation on March 13, broadcast by the White House press service.
Biden noted that he would ask Congress and banking regulators to introduce stricter rules, and also announced his intention to “protect jobs and small businesses.” He also urged Americans to trust the stability and security of the US banking system.
“Your deposits will be there when you need them,” he assured. After the speech, Biden refused to speak to the press – journalists asked whether the bank collapse would entail a “chain reaction.” But the President of the United States did not give an answer.
On March 10, California authorities closed Silicon Valley Bank (SVB) after a failed securities transaction. Two days ago, the Silvergate cryptocurrency bank, which invests in startups, was liquidated.
All insured deposits were transferred to a new entity – Deposit Insurance Santa Clara National Bank, the Axios portal reported.
The bankruptcy of SVB caused concern in the startup and IT sectors. This devastation was the largest in 15 years since the 2008 financial crisis.
On March 11, American billionaire and inventor Elon Musk said on Twitter that he is not against the acquisition of a bankrupt bank.
“I am open to this idea,” Musk responded to a comment in which he was offered to buy SVB and turn it into an electronic bank.
On March 13, it was learned that a similar bank, Signature Bank, was closed after SVB. The New York state regulator has decided to liquidate the organization because of “systemic risks.” All depositors were promised full access to their funds. According to a statement from the New York City Department of Financial Services, Signature Bank’s total assets were approximately $110.36 billion and deposits exceeded $88 billion.
American banking regulators – the Federal Reserve System (FRS, US Federal Reserve), FDIC (Deposit Insurance Corporation) and the Treasury Department – announced the creation of a plan to support depositors and banks’ emergency financing due to failures of the SVB and Signature Bank.
According to a statement by representatives of the regulators, CNBC reported that these measures are designed to help the country cope with the panic in the markets. “Today, we are taking decisive action to protect the US economy by building public confidence in our banking system,” said a joint statement.
Former US President Donald Trump wrote in Truth Social that the US will soon face a new and greater Great Depression due to Biden’s “blunder”.
According to Trump, there are already big problems in the country’s economy. He compared Joe Biden to Herbert Hoover (US President from 1929 to 1933). “We will experience a Great Depression much worse than in 1929,” said Trump, adding that his words were proven when banks began to fail.
At the same time, Joe Biden, in a televised speech, accused his predecessor Donald Trump of the collapse of Silicon Valley and Signature Bank banks.
Mikhail Vasiliev, chief analyst of Sovcombank, during a meeting with the Prime Minister’s economic information agency, expressed the opinion that the situation in the American and world financial system could worsen.
“The Fed missed its moment of fighting inflation and is now rapidly trying to raise rates. But now it is very likely that the economy will go into recession to beat inflation,” he said.
The agency reminded that in 2008 the US economy collapsed with a Fed rate of 5.25 – at the next meeting on March 22, the US central bank may raise the rate to 5 percent.
The analyst added that since 2020, the global economy has been in debt to overcome the effects of the COVID-19 pandemic. Therefore, a sharp tightening of financial conditions could lead to a new global economic crisis similar to the 2008 crash. This can lead to lower resource prices and lower purchasing power of the population.