Washington — Treasury Secretary Janet Yellen said on Sunday that the federal government will not provide a bailout package Silicon Valley Bank‘s investors after the bank was abruptly closedbut the financial regulators are “concerned” about the impact on savers and are working to meet their needs.
“During the financial crisis, there were investors and owners of systemic big banks that got bailed out,” Yellen said in an interview with “Face the Nation” on Sunday. “And the reforms that have been made mean we’re not going to do that again. But we’re concerned about savers and focused on meeting their needs.”
California regulators closed Silicon Valley Bank on Friday after depositors rushed to withdraw money over balance sheet concerns last week. The Federal Deposit Insurance Corporation (FDIC) was appointed as trustee and so were the regulators work to find a buyer for the institution, which was the 16th largest bank in the US prior to bankruptcy.
The collapse of the 40-year-old bank, which focused on the technology industry, is the largest by a financial institution since Washington Mutual’s bankruptcy in 2008.
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President Biden spoke with California Governor Gavin Newsom on Saturday night about Silicon Valley Bank and the federal response, and the FDIC spoke with members of the California congressional delegation late Saturday night.
Yellen said Treasury officials have heard from depositors, including many small businesses, in the wake of Silicon Valley Bank’s bankruptcy and that she is working with banking regulators to “design appropriate policies” to address the situation, though she declined to respond. provide further details. The FDIC, she said, is likely considering a “range of available options” to stabilize the situation, including a takeover by a foreign bank.
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“The US banking system is really safe and well capitalized. It’s resilient,” she said. “In the aftermath of the 2008 financial crisis, new controls were put in place, better capital and liquidity supervision, and it was tested during the early days of the pandemic and proved its resilience. So Americans can have confidence in the safety and soundness of our banking system .”
Still, the closure of Silicon Valley Bank has sparked nervousness about whether it could spark a run on other small and regional banks. However, Yellen said financial regulators are working to prevent the fallout from spreading to other institutions.
“We want to make sure that the problems that exist in one bank don’t contagion others that are healthy,” she said. “The aim of supervision and regulation is always to ensure that no contagion can occur.”
After the closure of Silicon Valley Bank, the FDIC said it created the Deposit Insurance National Bank of Santa Clara, to which Silicon Valley Bank insured deposits were immediately remitted. All insured depositors will have access to their insured deposits Monday morning, while uninsured depositors will receive an advance on the dividend in the coming week, the FDIC said. Future dividend payments may be made to uninsured depositors as the FDIC sells Silicon Valley Bank assets.
At the end of 2022, Silicon Valley Bank had about $209 billion in total assets and about $174.5 billion in total deposits, according to the agency.
But more than 85% of Silicon Valley Bank’s deposits were uninsured, according to estimates in a recent filing.
“We are very aware of the problems depositors will have,” said Yellen. “A lot of them are small businesses that employ people all over the country, and this is of course a big concern and [we’re] working with regulators to address these concerns.”
