The Biden administration’s scramble to prevent financial contagion from the crash of Silicon Valley Bank is both an attempt to shield a resilient but still-vulnerable economy and to prevent grave political fallout.
The Treasury Department and federal regulators insisted there was no systemic risk to the banking system as a whole that could cause a repeat of the cataclysmic 2008 meltdown as they raced against the opening of Asian markets with measures to head off a run on small or regional US banks.
They unrolled emergency measures Sunday evening that will guarantee deposits of SVB’s customers. Regulators also closed down Signature Bank, another institution that was threatening to collapse, and ensured its customers would get a similar deal. US taxpayers will not finance either move, officials said.
The swift action may temper immediate stress in the financial markets. But it is too early to say whether the government will be forced into more sweeping action amid rising concerns about the health of the finance sector. The suddenness of the crisis is exacerbating anxiety since SVB failed, apparently out of nowhere, in 48 hours. Assurances by the White House and Treasury Secretary Janet Yellen that the broader banking system is sound set up a new test of economic credibility for an administration scarred by its handling of high inflation.
President Joe Biden plans to address Americans on Monday morning about his administration’s emergency plan to contain the failure of the two banks.
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” the president said in a written statement on Sunday evening. “I am 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…
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