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The federal government will not bail out Silicon Valley Bank’s “investors and owners,” Treasury Secretary Janet Yellen said Sunday Face the nationand said the situation is different from the 2008 financial crisis as the tech industry was rocked by the bank’s sudden collapse amid fears of broader financial industry contagion.
US Treasury Secretary Janet Yellen addresses the National Association of Counties … [+]
Important facts
When asked about the possibility of a Silicon Valley bank bailout, Yellen noted that during the 2008 crisis, “there were investors and owners of systemically important big banks that were bailed out,” but said, “We’re not going to do that again,”
The government is “concerned about depositors and we are focused on meeting their needs,” she said.
Although she said she couldn’t go into detail, Yellen said, “I’ve been working with our banking regulators all weekend to draft appropriate policies to address this situation,” noting that a takeover of Silicon Valley Bank would be one Federal Deposit Insurance Corporation (FDIC) option under consideration.
Yellen indicated that the collapse would have no impact, saying, “The American banking system is really safe and well capitalized, it’s resilient.”
Meanwhile, Sen. Mark Warner (D-Va.) — a member of the Senate Finance Committee — told ABC This week “Best result” would be if Silicon Valley Bank finds a buyer before Asian markets open late Sunday, adding he is “optimistic”.
Crucial quote
“Following the 2008 financial crisis, unique controls were put in place, better capital and liquidity monitoring and [the banking system] was tested in the early days of the pandemic and has proven its resilience,” Yellen said. “So that Americans can have confidence in the safety and soundness of our banking system.”
key background
Silicon Valley Bank, which was previously the 16th-largest bank in the US and works with many well-known tech startups, was shut down by California regulators on Friday. The collapse marks the biggest bank collapse since the Great Recession of 2008 and caused the share prices of other similarly sized banks like First Republic to take severe falls amid fears that the collapse could contagion other banks. The bank’s rapid collapse was coupled with the Federal Reserve’s recent push to control inflation by raising interest rates, which reduced the value of government bonds held by the bank and prompted many of its tech customers to withdraw their deposits as seed funding ran short. On Wednesday, it was announced that the bank had sold $21 billion worth of securities at a $1.8 billion loss as it struggled to cope with withdrawals. The FDIC created the National Bank of Santa Clara to protect insured depositors, but the vast majority of the bank’s deposits are not insured by the FDIC, which only guarantees up to $250,000 per account, leading to claims for another Bank led to take over Silicon Valley Bank and makes its depositors whole. Companies like Roku, Roblox, and Circle held funds in SVB prior to the shutdown. The tech sector has already faced layoffs over the past few months, and cryptocurrency bank Silvergate was also shut down on Wednesday, prompting widespread concern across the industry at large.
against
Some Silicon Valley investors and figures have pushed for more direct federal action in response to the collapse of the Silicon Valley bank. Billionaire hedge fund titan Bill Ackman argued on Twitter the government “should have stepped in on Friday to guarantee SVB deposits” and venture capitalist David Sacks called Yellen and Fed Chair Jerome Powell should “announce that all depositors will be safe” and “place SVB among the top 4 banks”. bags later tweeted: “I’m not asking for a bailout. I’m asking banking regulators to ensure the integrity of the system.”
Further reading
These companies — Roku, Circle, Roblox, and more — held big bucks in Silicon Valley Bank when it collapsed (Forbes)
What you should know about the collapse of Silicon Valley Bank – the biggest bank failure since 2008 (Forbes)
Biggest banking collapse since the Great Recession sparks ‘overblown’ contagion fears – but big risks remain (Forbes)
SVB shut down by California regulator after bank stocks plummet amid turmoil (Forbes)
Silicon Valley Bank stock halted after falling 64% premarket as VC funds urge companies to withdraw funds (Forbes)
