Treasury Secretary Janet Yellen said Sunday that the federal government would not bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money.<\/p>\n
The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy people who used the bank \u2014 known for its relationships with technology startups and venture capital \u2014 had more than that amount in their account. There are fears that some workers across the country won’t receive their paychecks.<\/p>\n
Yellen, in an interview with CBS’ \u201cFace the Nation,\u201d provided few details on the government’s next steps. But she emphasized that the situation was much different from the financial crisis almost 15 years ago, which led to bank bailouts to protect the industry.<\/p>\n
\u201cWe\u2019re not going to do that again,” she said. “But we are concerned about depositors, and we\u2019re focused on trying to meet their needs.\u201d<\/p>\n
With Wall Street rattled, Yellen tried to reassure Americans that there will be no domino effect after the collapse of Silicon Valley Bank.<\/p>\n
\u201cThe American banking system is really safe and well capitalized,” she said. “It\u2019s resilient.\u201d<\/p>\n
Silicon Valley Bank is the nation\u2019s 16th-largest bank. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008. The bank served mostly technology workers and venture capital-backed companies, including some of the industry\u2019s best-known brands.<\/p>\n
Silicon Valley Bank began its slide into insolvency when its customers, largely technology companies that needed cash as they struggled to get financing, started withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest failure of a U.S. financial institution since the height of the financial crisis.<\/p>\n
Yellen described rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.<\/p>\n
\u201cThe problems with the tech sector aren\u2019t at the heart of the problems at this bank,\u201d she said.<\/p>\n
Yellen said she expected regulators to consider \u201ca wide range of available options,\u201d including the acquisition of Silicon Valley Bank by another institution. So far, however, no buyer has stepped forward.<\/p>\n
Tom Quaadman, executive vice president of the U.S. Chamber of Commerce\u2019s Center for Capital Markets Competitiveness, said in a statement, \u201cWe urge the administration to facilitate a quick acquisition, guaranteeing all bank depositors have access to their cash.\u201d<\/p>\n
Regulators seized the bank’s assets on Friday. Deposits that are insured by the federal government are supposed to be available by Monday morning.<\/p>\n
\u201cI\u2019ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” Yellen said. “I can\u2019t really provide further details at this time.\u201d<\/p>\n
House Speaker Kevin McCarthy, R-Calif., told Fox News Channel’s \u201cSunday Morning Futures\u201d that he hoped the administration would announce the next steps as soon as Sunday.<\/p>\n
\u201cThey do have the tools to handle the current situation, they do know the seriousness of this and they are working to try to come forward with some announcement before the markets open,\u201d he said.<\/p>\n
McCarthy also expressed hope that Silicon Valley Bank would be purchased.<\/p>\n
\u201cI think that would be the best outcome to move forward and cool the markets and let people understand that we can move forward in the right manner,\u201d he said.<\/p>\n
Sen. Mark Warner, D-Va., said in an interview with ABC News’ \u201cThis Week\u201d that he was concerned that the bank’s collapse could prompt nervous people to transfer money from other regional banks to larger institutions.<\/p>\n
\u201cWe don\u2019t want further consolidation,\u201d he said.<\/p>\n
Warner suggested there would be a \u201cmoral hazard\u201d in reimbursing depositors in excess of the $250,000 limit and said an acquisition would be the best next step.<\/p>\n
\u201cI\u2019m more optimistic this morning than I was yesterday afternoon at this time,” he said. “But, again, we will see how this plays out during the rest of the day.\u201d<\/p>\n
He added: “What we\u2019ve got to focus on right now is how do we make sure there\u2019s not contagion.\u201d<\/p>\n
President Joe Biden and Gov. Gavin Newsom, D-Calif., spoke about \u201cefforts to address the situation\u201d on Saturday, although the White House did not provide additional details on next steps.<\/p>\n
Newsom said the goal was to \u201cstabilize the situation as quickly as possible, to protect jobs, people\u2019s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.\u201d<\/p>\n