Treasury Secretary Janet Yellen says US authorities is not going to bail out Silicon Valley financial institution
Janet Yellen, US Secretary of the Treasury, speaks during a Financial Stability Oversight Council (FSOC) meeting at the Department of the Treasury in Washington, DC, on Friday, December 16, 2022.
Ting Shen | Bloomberg | Getty Images
After regulators closed Silicon Valley Bank on Friday and confiscated its deposits, US Treasury Secretary Janet Yellen said Sunday that she was working to “address the situation in a timely manner” but that a major government bailout was not on the table.
“Let me be clear that during the financial crisis there were investors and owners of systemically important big banks that were bailed out and the reforms that have been enacted mean that we will not do that again,” Yellen told CBS’ Face of the Nation. “But we are concerned about depositors and focused on meeting their needs.”
SVB’s spectacular implosion began late Wednesday when it surprised investors with the news that it had to raise $2.25 billion to shore up its balance sheet. Assurances from SVB’s CEO weren’t enough to stop the bank run, and savers withdrew more than $42 billion by the end of the day Thursday, setting the stage for the second largest bank collapse in US history.
The Federal Deposit Insurance Corporation (FDIC) announced Friday that it will cover up to $250,000 per depositor and may start paying out those depositors as early as Monday. But the vast majority of SVB’s clients were companies that had far larger uninsured amounts held at the bank, prompting widespread concern about how people will be able to access the rest of their funds.
Yellen said regulators are considering a wide range of options for SVB, including takeovers.
“This is really a decision for the FDIC as they decide how best to wind up this company,” Yellen said.
Former FDIC Chairwoman Sheila Bair said Sunday that finding a buyer for SVB was “the best outcome”.
“The problem is that this was a liquidity shortfall, it was a bank run, so they didn’t have time to prepare to market the bank,” Bair told NBC’s Meet the Press. “They have to do that now and catch up.”
The consequences of the collapse of the SVB could be far-reaching. Startups may be unable to pay employees in the coming days, venture investors may struggle to raise funds, and an already battered sector may face deeper malaise.
Bair said the FDIC can help companies with payroll if there is a systemic risk exception, which would be “an exceptional procedure.” She said she thinks it’s going to be “hard to say this is systemic in any way.”
Senator Mark Warner, D-Va. said on Sunday the best outcome would be to find a buyer for the SVB before markets open in Asia. Warner said he is more optimistic that the FDIC will find a solution than he was Saturday afternoon.
“The bank’s shareholders will lose their money, let’s get that straight. But the depositors can be taken care of,” he told ABC’s This Week.
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