President Biden said Monday that investors in Silicon Valley Bank and Signature Bank will not be protected following the banks’ closures, while assuring depositors, many at tech startups, that they will have access to their money.
Both banks were closed by regulators in recent days, with SVB especially of concern to investors and startups in tech.
In remarks streamed early Monday Biden also said taxpayers will be protected because the funds used to pay depositors to meet payrolls and more will come from fees that the banks paid into the FDIC.
“Investors will not be protected,” Biden said. “They know they took a risk and when the investment didn’t pay off they would lose their money. That’s how capitalism works.”
He said regulators will pursue actions to reduce the risk of similar failures in the future. When asked by reporters what actually led to the problems that led to the closures, Biden offered no response.
However, he did say that when banks failed in 2008, the Obama administration worked to help passage of the Dodd Frank protections, but Biden added that the prior administration under Donald Trump “rolled back some those requirements” that Biden pledged to reverse. “We will not stop…to do whatever is needed,” he said.
While the root cause of the failures is investigated, 13 venture capitalist firms including Greylock and others took to Linked In to post a statement after the closure of SVB on Friday saying “the events that unfolded over the past 48 hours have been deeply disappointing and concerning.” They said if SVB were purchased and “appropriately capitalized” then they would be “strongly supportive.”
The likelihood of a purchase seemed to have disappeared, however.
After their statement was posted, an SVB bank official, Sanjay Golsalia called out the VCs in a response. "I wish these very same VCs would have banned together and kept their deposits, their porco deposits at SVB and 'stayed calm.'" Golsalia said. "They now have not only very likely lost a valuable bank partner that has served them unconditionally through tough times but will go underserved in new bank relationships. They fundamentally betrayed their partner and have undoubtedly shot themselves in the foot."