Yellen rules out Silicon Valley bank bailout: ‘We won’t do it again’

Washington — Treasury Secretary Janet Yellen said Sunday that the federal government would not provide bailouts Silicon Valley Banks investors were after the bank suddenly closedbut financial regulators are “concerned” about the impact on depositors and work to meet their needs.

In an interview with Face the Nation on Sunday, Yellen said: “During the financial crisis, there were investors and owners of large systemic banks that were bailed out. “And the introduced reforms mean that we won’t do it again. But we are concerned about the depositors and we are trying to meet their needs.”

On Sunday, the Treasury Department, the Federal Reserve and the FDIC said the government would guarantee deposits for SVB account holders. Depositors will be able to access all their money from Monday, March 13. The taxpayer will not bear any costs related to the Silicon Valley Bank’s decision,” the agencies said in a joint statement.

Treasury Secretary Janet Yellen on “Face the Nation” on March 12, 2023.

CBS News

On Sunday, the Federal Reserve announced the creation of a new Bank Term Funding Program (BTFP) to provide additional funding to “eligible depository institutions to ensure banks’ ability to meet the needs of all depositors.” release. “This action increases the banking system’s ability to protect deposits and provide the economy with continuous money and credit.”

The Silicon Valley bank was shut down on Friday after California regulators raised concerns about its balance sheet last week and depositors rushed to withdraw money. The Federal Deposit Insurance Corporation (FDIC) has been appointed receiver, and the regulators are works to find the buyer of an institution that was ranked as the 16th largest bank in the US before it failed.

The collapse of the 40-year-old bank that underpinned the tech industry is the biggest for a financial institution since the failure of Washington Mutual in 2008.

President Biden spoke with California Governor Gavin Newsom on Saturday about the Silicon Valley bank and the federal response, and the FDIC spoke with members of California’s congressional delegation on Saturday evening.

Yellen said after the Silicon Valley bank failure that Treasury officials had listened to depositors, many of whom are small businesses, and were working with bank regulators to “develop appropriate policies” to address the situation, but she declined. provide additional details. He said the FDIC is looking at “a range of available options” to stabilize the situation, including a possible foreign bank purchase.

“The American banking system is really safe and well capitalized. He is resilient,” he said. “After the 2008 financial crisis, new controls were put in place, capital and liquidity controls improved, and it has been tested and proven resilient in the early days of the pandemic. So Americans can be confident in the safety and soundness of our banking system.”

However, the closing of the Silicon Valley bank has raised concerns about whether it could cause other small and regional banks to fail. Yellen said financial regulators are working to prevent the damage from spreading to other institutions.

“We want to make sure that problems in one bank do not cause contagion in others,” he said. “The purpose of surveillance and regulation is always to ensure that infectious diseases do not occur.”

In a joint statement, the Treasury Department, the Federal Reserve and the FDIC said steps are being taken to address the other bank closings. “We also specifically announce such systemic risk for Signature Bank, New York, New York, which was closed today by its state charter. All depositors of that institution will be fully reimbursed. As per Silicon Valley Bank’s decision, no. damages will be borne by the taxpayer,” – said in the message.

After the Silicon Valley bank closed, the FDIC said it created a national deposit guarantee bank in Santa Clara, to which the insured deposits from the Silicon Valley bank were immediately transferred. All insured depositors will have access to their insured deposits on Monday morning, and uninsured depositors will receive an advance dividend within the next week, the FDIC said. As the FDIC sells the Silicon Valley bank’s assets, future dividends may be paid to uninsured depositors.

According to the agency, at the end of 2022, Silicon Valley Bank had total assets of about $209 billion and total deposits of about $174.5 billion.

But a recent regulatory filing estimates that more than 85% of Silicon Valley bank deposits are uninsured.

“We know very well the problems that depositors face,” Yellen said. “A lot of them are small businesses that employ people all over the country, and of course that’s a major concern and [we’re] working with regulators to address these concerns.”

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