Biden discusses SVB collapse with California governor
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The White House says Biden and Governor Gavin Newsom discussed steps to address the developments.
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A sign hangs at Silicon Valley Bank’s headquarters in Santa Clara, California, on March 10, 2023. (AFP)
US President Joe Biden discussed the failure of Silicon Valley Bank (SVB) with California Governor Gavin Newsom and the required efforts to respond to the issue, the White House said in a statement on Sunday.
The bank is reportedly America's 16th-largest bank and marked the second-largest bank failure in US history.
California's Department of Financial Protection and Innovation (CDFPI) and Federal Deposit Insurance Corp (FDIC) announced on Friday the seizing of SVB's assets - worth nearly $175 billion - and relocating them to a newly established institution, the Deposit Insurance Bank of Santa Clara.
The new body will be responsible for making payments to clients with insured deposits on Monday, while the remaining assets will be auctioned to pay other depositors.
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"The President and the Governor also spoke about Silicon Valley Bank and efforts to address the situation," the statement read.
As depositors rushed to withdraw their money following the news, SVB tried to reassure its clients of its solid finances, but that did not stop over $80 billion in shares value from being slashed within 48 hours followed by a free fall of its stock values until their trade was halted.
The bank, which is one of the main lenders and a partner to technology and healthcare startups that went public in 2022 - including well-known firms - has sent the early-stage tech companies in a spiral.
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Trying to assure markets, Cecilia Rouse, head of the White House Council of Economic Advisers, said the banking system currently is in a much better state than it was in 2008.
The White House also said that Treasury Secretary Janet Yellen was “watching closely".
Yellen also met with heads of the Federal Reserve, CFDIP, and the Comptroller of the Currency on Friday to discuss the developments, said the Treasury Department in a statement.
The Treasury Secretary confirmed her belief that banking regulators will respond appropriately to the situation, the statement said.
The bank's close ties to the tech industry hit hard the sector that has been already struggling for over a year, witnessing mass layoffs in recent months.
Government support for California which was struck by a severe storm earlier, which led to massive landslides and floods, was also discussed by the two.
