No Federal Bailout for Silicon Valley Bank, Treasury Secretary Says
Treasury Secretary Janet Yellen dismissed the possibility of a federal bailout for Silicon Valley Bank after it collapsed last week. “We’re not going to do that again,” she said, referring to the bailouts during the 2008 financial crisis. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”
“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking,” Yellen said on CBS’s Face the Nation on Sunday. “And the reforms that have been put in place means that we’re not going to do that again.”
The California-based Silicon Valley Bank (SVB), the 16th largest in the U.S., serves many tech companies and employees of those companies. A slew of tech firms began withdrawing of cash while they were struggling to find financing amid rising interest rates. This led the bank to sell many of its securities at a loss, sparking a run that caused the second largest bank failure in America after Washington Mutual’s 2008 collapse. Unable to find a buyer or raise capital, the bank was shuttered by California regulators who put it in receivership under the Federal Deposit Insurance Corporation (FDIC) on Friday. The FDIC insures deposits made to banks, but only up to $250,000 per depositer at each insured bank.
Yellen attempted to quell fears that SVB’s collapse would lead to other banking institutions failing. “We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” Yellen said Sunday.
“The American banking system is really safe and well capitalized,” she added. “It’s resilient.”