Biden assures banking system is secure despite second-largest bank collapse in U.S.

The U.S. Banking System is Safe and Sound, Says President Biden

First Republic Bank Resolved

President Joe Biden has confirmed that the U.S. banking system is “safe and sound” after federal regulators facilitated the sale of the distressed First Republic Bank. Speaking from the White House on May 1 to mark National Small Business Week, Biden announced that all First Republic insured and uninsured depositors would be protected, and shareholders would lose their investments. Taxpayers would not be on the hook, Biden stated.

Regulators to Enhance Regulations and Supervision

Biden noted that he encouraged Congress to provide regulators with the tools they need to ensure all bank executives are accountable. He also called upon regulators to enhance regulations and supervision of large and regional banks. “We have to make sure that we’re not back in this position again, and I think we’re well on our way to be able to make that assurance,” he stated.

FDIC Praised for Quick Work

House Financial Services Committee chairman Patrick McHenry (R-N.C.) agreed that the American people should be confident in the safety of their deposits at U.S. banks and lauded the Federal Deposit Insurance Corp. (FDIC) for its “quick work” in resolving the First Republic issue. However, McHenry questioned why the FDIC did not do the same thing in March when Silicon Valley Bank was placed into receivership. “It’s critical that the Biden administration and its regulators not politicize these events,” he said in a statement.

JPMorgan Chase to Transform First Republic’s Locations

During a weekend auction, regulators had solicited bids for the company, which included $229 billion in assets and $104 billion in deposits. The nation’s largest financial institution, JPMorgan Chase, announced that it would transform First Republic’s 84 locations in eight states and reopen them as branches of JPMorgan. As a result, depositors will have full access to all of their deposits.

Investors Less Optimistic

While JPMorgan CEO Jamie Dimon believes that the worst is over, investors appear to be less optimistic about the situation. Regional bank stocks tumbled to kick off the trading week, with West Bancorp falling about 2 percent, US Bancorp sinking as much as 3 percent, Western Alliance dropping nearly 2 percent, and State Street Corp slumping close to 1 percent. In addition, regional banking exchange-traded funds (ETFs) declined on May 1, including the SPDR S&P Regional Banking ETF, which plunged about 2.5 percent. These banks also contain large amounts of uninsured deposits, especially State Street Bank, with 91.2 percent.

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