Yellen rules out Silicon Valley Bank bailout: ‘We’re not going to do it again’

Washington. Treasury Secretary Janet Yellen said Sunday the federal government will not bail out Silicon Valley Bank investors after the bank was abruptly closed, but said financial regulators are “worried” about the impact on depositors and are working to meet their needs.

“During the financial crisis, investors and owners of the systemic big banks were rescued,” Yellen told Face the Nation on Sunday. “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.”

California regulators closed Silicon Valley Bank on Friday after depositors rushed to withdraw money last week amid concerns over its balance sheet. The Federal Deposit Insurance Corporation (FDIC) has been named administrator, and regulators are working to find a buyer for the institution, which was the 16th-largest bank in the US prior to its bankruptcy.

The collapse of the 40-year-old tech bank was the biggest financial institution since Washington Mutual collapsed in 2008.

President Biden spoke with California Gov. Gavin Newsom about the Silicon Valley bank and the federal government’s response on Saturday, and the FDIC spoke to members of a California congressional delegation late Saturday night.

Yellen said that since the Silicon Valley bank failure, Treasury officials have heard from depositors, many of whom are small businesses, and she has been working with banking regulators to “develop appropriate policies” to address the situation, though she declined to say. provide additional information. The FDIC is likely looking at “a number of available options” to stabilize the situation, including an acquisition by a foreign bank, she said.

“The American banking system is really safe and well capitalized. She is resilient,” she said. “Following the 2008 financial crisis, new controls were introduced, capital and liquidity oversight improved, and it was tested in the early days of the pandemic and proved to be resilient. This way, Americans can have confidence in the safety and security of our banking system.”

However, the closure of Silicon Valley Bank raised concerns about whether it would spark a massive run on other smaller and regional banks. However, Yellen said financial regulators are working to prevent the effects from spilling over to other institutions.

“We want to make sure that the problems that exist in one bank do not infect others that are healthy,” she said. “The goal of surveillance and regulation is always to prevent contagion.”

Following the closure of Silicon Valley Bank, the FDIC said it created the National Deposit Insurance Bank of Santa Clara, to which the insured deposits from Silicon Valley Bank were immediately transferred. All insured depositors will have access to their insured deposits by Monday morning, while uninsured depositors will receive an upfront dividend within the next week, the FDIC said. Future dividend payments may be made to uninsured savers as the FDIC sells the assets of Silicon Valley Bank.

As of the end of 2022, Silicon Valley Bank’s total assets were about $209 billion, with total deposits of about $174.5 billion, according to the agency.

But more than 85% of Silicon Valley Bank deposits were uninsured, according to estimates in a recent regulators report.

“We are well aware of the challenges that savers will face,” Yellen said. “Many of them are small businesses that employ people all over the country, and of course this is a major concern and [we’re] working with regulators to try and resolve these issues.”

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