The American banking sector is not going to explode, US President Joe Biden said on Friday, but added that the country still needed some time to resolve the present difficulties at financial institutions.
The president said US lenders were in relatively good shape with the government throwing all its effort into containing the fallout from the recent string of bank failures.
Biden said some time would be needed for the situation to stabilize but denied the rescue of Credit Suisse by fellow European giant UBS was a direct consequence of what has happened in the US.
“I think we’ve done a pretty damn good job. People’s savings are secure,” he told reporters at a news conference in the Canadian capital of Ottawa. “I think it’s going to take a little while for things to just calm down, but I don’t see anything that’s on the horizon that’s about to explode.”
Earlier this month, regulators shuttered Silicon Valley Bank (SVB), the country’s 16th biggest lender, in what would become the largest US bank failure since the 2008 financial crisis and the second-largest bank failure in US history. The third-largest came just days later when Signature Bank ceased operations.
The US Federal Reserve has meanwhile announced a new Bank Term Funding Program that will offer loans of up to a year to shore up confidence in the banking system and protect depositors at failing banks. Under the new scheme, both insured and uninsured depositors will get full access to their money through a special fund of the Federal Deposit Insurance Corporation (FDIC). The regulator has also eased the terms of banks’ access to its discount window.
According to Biden, in the event other American lenders fail, federal deposit insurance could be tapped for deposits above $250,000.
“If we find that there’s more instability than appears, we’d be in a position to have the FDIC use the power it has to guarantee those loans above $250,000 like they did already,” he said.