Washington’s banking rescue had a rocky start Monday on Wall Street, as the government’s response to the collapse of Silicon Valley Bank failed to quell doubts about the health of some midsize banks and left investors debating whether the Federal Reserve would be forced to change course in its fight against inflation.
The day began with President Biden at the White House seeking to calm fears of a banking crisis before leaving Washington for a California swing.
“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” the president said in midmorning remarks from the Roosevelt Room.
In Silicon Valley, relieved customers lined up outside SVB branches to withdraw funds they had feared would be lost. Depositors at the bank’s Menlo Park location said they waited up to two hours to get their money in cashier’s checks. The only evidence of the failed bank’s new owners was a Federal Deposit Insurance Corp. news release taped to the door.
Even some of the nation’s largest and best-protected banks were shunned. Shares of Citigroup lost more than 7 percent while Wells Fargo fell 6 percent. Broader stock markets were flat.
“Payrolls are being met in Silicon Valley. There aren’t massive outflows that we can see. So I think that means it has been reasonably successful,” said Lawrence Summers, a former treasury secretary. “But the financial system suffered a shock and, while the emergency room physicians have done a good job, the patient is not back to full health.”