WASHINGTON – California Democratic Rep. Ro Khanna on Sunday called on the Biden administration to take “decisive action.” rapid decline Silicon Valley Bank and ensure that depositors are protected and have access to their accounts on Monday morning.
“I think they understand the gravity but they need to take decisive action. Time is ticking,” Khanna said in an interview on “Face the Nation” about President Biden and his administration. “I think US banking is safe. I don’t think it’s a systemic risk. Here’s what’s going to happen. Emailing every person at these tech companies: Get your money out of the regional banks, put them in the Big Four.”
The Silicon Valley bank, formerly headquartered in Khanna’s congressional district, was abruptly shut down by California regulators on Friday as depositors rushed to withdraw funds amid concerns about the bank’s balance sheet. The Federal Deposit Insurance Corporation (FDIC) was appointed receiver and created the Deposit Insurance National Bank of Santa Clara, to which all insured deposits of Silicon Valley banks were transferred.
The 40-year-old bank was ranked as the 16th largest in the US before its failure and was the largest financial institution to collapse since Washington Mutual at the height of the financial crisis in 2008. At the end of 2022, Silicon Valley Bank had roughly $209 billion in total assets and about $174.5 billion in total deposits, according to the FDIC.
President Biden spoke with California Governor Gavin Newsom on Saturday about Silicon Valley Bank and the federal response, and Treasury Secretary Janet Yellen. Says “Face the Nation” That he is working with bank regulators to “design appropriate policies” to deal with the situation, though he declined to elaborate on what those actions might be.
Yellen did cancel A federal bailout for Silicon Valley bank investors, and said the Biden administration is working to meet the needs of its depositors.
But Khanna said there needs to be “more clarity and greater strength” from the Treasury Department, and said Treasury has precedent for coordinating with the Federal Reserve and the FDIC to insure every depositor to prevent a run on regional banks.
“The way to solve this is to have access to depositors’ accounts,” he said. “Look, the bargain in our country, ever since FDR, has always been the investors, the shareholders who lose. I have no sympathy for the executives, no sympathy for the people who stop there. But the depositors are protected.”
Khanna said many of Silicon Valley Bank’s depositors are climate and health care start-ups, wine industry companies and defense firms that help the U.S. stay competitive with China.
“They’re hiring Americans all over the country, and they didn’t take the risk. They just had their money in a bank, and we’re saying they need to be guaranteed,” he said.
are federal regulators Working to find a buyer for Silicon Valley Bank, and Yellen told “Face the Nation” that the FDIC is considering “a range of available options” to stabilize the situation, including possibly an acquisition by a foreign bank.
Khanna said the “ideal scenario” would be for another bank to buy Silicon Valley Bank’s assets, an option that members of California’s congressional delegation pressed during a call with the FDIC Saturday night.
“To make that happen, you have to get the FDIC and the Treasury involved, because these assets are illiquid, and they can pay off 10 years from now,” he said. “I don’t think you’ll find a private seller without the Treasury Department and the FDIC actively engaged in liquidity with these Treasury bonds.”
But Khanna lamented that there is a disconnect between how quickly the situation involving Silicon Valley banks is evolving and the speed with which the government is working to contain the fallout.
“Right now things move at the speed of Twitter, and government doesn’t move at that speed,” he said. “And I think they don’t understand what the problem might be and how fast the money is moving and that might be the challenge. There’s no systemic risk, but there is consolidation risk.”
Because many of the companies that have done business with Silicon Valley Bank are start-ups and venture capital firms, the California Democrat warned about the failure’s impact on American innovation.
“All the legislation that we’ve passed in Congress, the climate (inflation reduction act), the CHIPS Act to bring back semiconductors, it depends on the innovation pipeline, it depends on the technology pipeline, and that’s why it’s such an important issue,” he said. said “What’s hurting is the rapid rise in interest rates, as well as now this systemic risk and it’s going to hurt the innovation pipeline and it’s going to hurt the common man.”