The overnight collapse of two major traditional banks Silicon Valley Bank (SVB) and Signature Bank set off a chain of events that impacted millions of businesses, venture capitalists, and bottom-line investors. However, U.S. President Joe Biden assured taxpayers they will not feel the pain of federal action to protect savers.
Major stablecoins including USD Coin (USDC), USDD (USDD) and Dai (DAI) were de-pegged from the U.S. dollar on March 11 after Circle announced that $3.3 billion of its $40 billion in reserves was trapped in SVB.
Knowing that many other entities linked to the failed bank may suffer irreparable damage, Biden announced on March 12 his commitment to hold those responsible accountable for the incident. While the federal government's proactive approach to minimizing losses is appreciated, many point out that it is taxpayers who will ultimately be bailed out by savers. On March 13, Biden expressed concern in a tweet: “Thanks to actions we've taken over the past few days to protect depositors from Silicon Valley and Signature Banks, Americans can have confidence that our system is safe. People’s deposits will be there when they need them – at no cost to the taxpayer.”
Biden assured U.S. citizens that the traditional financial system is safe after federal government intervention. He further stated that taxpayers will not be burdened by saving SVB and Signature Bank depositors: "People's savings will show up when they need it - at no cost to the taxpayer." However, Biden's Twitter followers didn't fully buy into the idea, as many pointed out, "Everything you do or touch will cost the taxpayers!"
Meanwhile, the Fed is closely investigating the factors that led to SVB's collapse, including how it supervised and managed the now-defunct financial institution. As previously reported by Cointelegraph, SVB was shut down by the California Department of Financial Protection and Innovation on March 10, without providing a specific reason why the bank was forced to close. However, SVB is suspected to be on the brink of collapse due to severe liquidity problems related to significant losses on government bond investments and unprecedented cash withdrawals.
