Treasury Secretary Yellen says she won’t bail out Silicon Valley Bank

March 12 (UPI) — U.S. Treasury Secretary Janet Yellen said the collapse of the Silicon Valley bank does not require government bailouts.

Yellen appeared on Facing the nation on CBS Sunday, where she discussed the government’s role in the event of a financial institution’s collapse.

Yellen said the closure of Silicon Valley Bank is different from the string of banks that were bailed out during the 2008 economic crisis due to reforms that have been implemented since then.

“Let me be clear that during the financial crisis there were investors and owners of the systemic big banks that were bailed out and we are certainly not looking,” she said.

“And the reforms that have been made mean that we are not going to do it again. But we care about contributors and are focused on meeting their needs.”

The California Department of Financial Protection shut down SVB on Friday, noting closure of the largest bank after Washington Mutual in 2008 and became the first FDIC-insured bank to close since Almena State Bank in 2020.

Yellen said the Treasury Department is monitoring the situation closely, in part to detect and prevent any potential repercussions for other banking systems.

“Let me just say that we want to make sure that the problems that exist in one bank do not infect others that are healthy,” Yellen said.

Because SVB is insured by the Federal Deposit Insurance Corporation, insured customers are expected to receive payouts of up to $250,000 starting Monday. Margaret Brennan of CBS stated that about 85% of her clients are uninsured.

The bank mainly served the technology industry. Yellen said how this will affect the industry will depend on how the bank’s closure is ultimately handled. She said she expected government action to be “timely” but would not explain what deal would be done or when.

“I would say that although the tech sector is suffering from a recession, there have been significant layoffs,” the minister said.

“This bank’s problems, based on reports of its situation, suggest that because we are in a higher interest rate environment, the assets it owns, many of which are Treasury assets or mortgage-backed securities that are government-guaranteed, are losing market value, and technology sector problems are not at the root of this bank’s problems.”

As for the overall economy, Yellen thinks it’s in good shape.

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