Connect with us

Top Stories

Silicon Valley Bank Will Not Be Bailed Out By US – Yellen



Silicon Valley Bank Will Not Be Bailed Out - Treasury Secretary Janet Yellen

Treasury Secretary Janet Yellen said Sunday morning that the federal government would not bail out Silicon Valley Bank, but is working closely with banking regulators to help protect the thousands of depositors who are concerned about losing their money.

“We’re very aware of the problems that depositors will have, many of them are small businesses that employ people across the country,” Yellen said in an interview with CBS’ Face The Nation. “We certainly are working to address the situation in a timely way.”

She provided little new details on the government’s next steps, but emphasized that the response would be much different from the 2008 financial crisis, when it bailed out several of the biggest banks.

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out…and the reforms that have been put in place means we are not going to do that again,” she said. “But we are concerned about depositors and are focused on trying to meet their needs.”

READ ALSO:   Tinubu: Analyst Who Tweeted Picture Of CJN On Wheelchair Speaks, Discloses Reason...

The Federal Deposit Insurance Corporation, which took control of Silicon Valley Bank on Friday, insures deposits up to $250,000. But the vast majority of tech startups and venture capitalists who used the bank had deposits well above that amount, raising concerns that some workers wouldn’t receive their paychecks or could be laid off.

Silicon Valley Bank, founded almost 40 years ago, is the nation’s 16th-largest bank. Its collapse—the second biggest bank failure in U.S. history—sent shockwaves across the financial system and shook the tech industry. But Yellen on Sunday tried to reassure Americans that the fallout does not pose systemic risk.

“America’s economy relies on a safe and sound banking system,” she said. “Americans need to feel confident that the banking system is safe and sound.”

Silicon Valley Bank’s collapse was largely tied to the Federal Reserve’s ongoing series of interest rate hikes designed to cool the economy and fight inflation, Yellen said. The bank struggled when its depositors panicked and began withdrawing their money and the bank had to sell bonds at a $1.8 billion loss to cover the withdrawals. Many of the bank’s assets, such as bonds and mortgage-backed securities, also lost market value as rates climbed.

READ ALSO:   Atiku reacts to Kaduna killings as death toll hits 37

Some economic analysts have said that the troubles at Silicon Valley Bank were also due to the recent spate of challenges for tech companies, which have seen stock prices plummet over the last 18 months, prompting massive layoffs across the industry. But even though the bank mostly serves tech workers and venture capital-backed companies, Yellen emphasized that the high interest rate environment is the most likely reason for the fallout.

“The problems with the tech sector aren’t at the heart of the problems at this bank,” Yellen said.

Yellen added that she expects regulators to consider “a wide range of available options,” including the acquisition of Silicon Valley Bank by another institution. So far, no buyer has stepped forward, but Bloomberg reported that SVB Securities, the bank’s investment banking arm, is exploring ways to buy the firm. Regulators seized the bank’s assets on Friday, and deposits that are insured by the federal government are supposed to be available by Monday morning.

READ ALSO:   JUST IN: Biden Expels 10 Russian Diplomats In Retaliation For Election Interference, Hacking

“I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” Yellen said. “I can’t really provide further details at this time.”


President Joe Biden has not publicly addressed the situation during his weekend trip to Wilmington, Del., but the White House says he spoke with California’s Democratic Gov. Gavin Newsom on Saturday about “efforts to address the situation.” The White House did not provide additional details on next steps, and did not respond to a request for comment.

Also Read...