Update (0925ET): US President Joe Biden attempted to calm the markets in a Monday morning speech, where he insisted that “Americans can have confidence that the banking system is safe,” and that US bank regulators and Treasury Secretary Janet Yellen took “immediate” action to stop contagion among small and medium-sized banks following the Friday collapse of Silicon Valley Bank.
“Americans can rest assured that our banking system is safe,” he reiterated.
Biden made clear that investors in the failed banks will not be protected.
“They knowingly took a risk, and when the risk didn’t pay off, investors lose their money,” he said, adding that the people running the troubled banks should be fired.
When asked by reporters if there would be a ripple effect, and whether he could explain how and why this happened, Biden ignored the questions.
* * *
With bank stocks – most notably small/medium-sized banks – deeply in the red, it appears at first glance that The Fed/TSY/FDIC cunning plan to implicitly backstop every deposit is not stemming the contagion’s tide.
However, don’t let that ‘fact’ get in the way of some good politics as President Biden readies to deliver remarks that ‘you have nothing to fear but fear itself’ as he explains how his admin will maintain a resilient banking system.
“Tomorrow morning, I will deliver remarks on how we will maintain a resilient banking system to protect our historic economic recovery,” Biden was cited in the White House statement
Is he really going to maintain the narrative that the economy is ‘strong as hell’ amid a systemic financial crisis?
White House statements claimed Biden had directed US Treasury Secretary Janet Yellen and National Economic Council Director to work with banking regulators to address problems at Silicon Valley Bank and Signature Bank.
“I’m pleased they reached a solution that protects workers, small businesses, taxpayers, and our financial system,” he added.
He also assured action against “those responsible for the mess”.
“I’m firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again,” he tweeted.
The messaging will be clear:
1) This is not 2008 (correct, this is a good old-fashioned traditional bank run at the speed of light with mobile banking)
2) This is not a bailout (except that it 100% bails out all the VC and startup depositors everywhere all at once)
3) Someone will take the blame (Barney Frank already blamed crypto, the ‘woke’ risk managers didn’t hedge rate risk, and The Fed was the main regulator and also caused the hole in SVB’s balance sheet via rate-hikes)