Wilmington, Del. (AP) — Treasury Secretary Janet Yellen said Sunday that the federal government will not bail out Silicon Valley Bank.But it works to help depositors who care about their money.
The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many institutions and wealthy individuals who used the bank — known for its ties to tech startups and venture capital — was more than that in their account. There are fears that some workers across the country will not receive their salaries.
Yellen offered some details on the administration’s next steps in an interview with CBS’ “Face the Nation.” But he emphasized that the situation was very different Since the financial crisis almost 15 years ago, it has led to bank bailouts to protect the industry.
“We’re not going to do it again,” he said. “But we care about depositors, and we’re focused on meeting their needs.”
Wall Street rumbledYellen tried to reassure Americans that there would be no domino effect after the collapse of Silicon Valley banks.
“The US banking system is very safe and well capitalized,” he said. “It’s resilient.”
Silicon Valley Bank is the 16th largest bank in the country. It was the second largest bank failure in US history after the collapse of Washington Mutual in 2008. The bank mostly served tech workers and venture capital-backed firms, including some of the industry’s top brands.
Silicon Valley Bank was forced into bankruptcy when tech companies in need of cash started withdrawing their deposits as its customers struggled to get financing. The US financial institution has suffered its biggest failure since the height of the financial crisis.
Yellen described rising interest rates by the Federal Reserve Fighting inflation is a major problem for Silicon Valley banks. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates rose.
“The problems in the technology sector are not at the heart of the problems at this bank,” he said.
Yellen said she expects regulators to consider the “broad range of options available,” including another firm’s acquisition of Silicon Valley Bank. However, no buyer has come forward so far.
Tom Quatman, director of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said in a statement, “We urge the administration to facilitate a swift acquisition to guarantee all bank depositors access to their money.”
Regulators seized the bank’s assets on Friday. Federally insured deposits are available by Monday morning.
“I have been working throughout the weekend with our bank regulators to design appropriate policies to address this situation,” Yellen said. “I cannot provide any further details at this time.”
House Speaker Kevin McCarthy, R-Calif., told Fox News Channel’s “Sunday Morning Futures” that he hopes the administration will announce next steps as soon as Sunday.
“They have the tools to deal with the current situation, they know the severity and they are trying to make some announcements before the markets open,” he said.
McCarthy also expressed hope that Silicon Valley Bank would be acquired.
“I think it’s the best decision to move forward and to cool down the markets and get people to understand that we can move forward in the right way,” he said.
Sen. Rep. Mark Warner, D-Va., expressed concern in an interview on ABC News’ “This Week” that the bank’s collapse could prompt nervous people to shift money from other regional banks to larger firms.
“We don’t want more consolidation,” he said.
Warner suggested there was a “moral hazard” in repaying depositors above the $250,000 limit and said an acquisition would be the best next step.
“I’m more optimistic this morning than I was yesterday afternoon at this point,” he said. “But, again, we’ll see how it plays out throughout the day.”
He added: “What we have to focus on now is how to make sure there is no infection.”
President Joe Biden and Gov. Newsom, D-Calif., spoke on Saturday about “efforts to address the situation,” though the White House did not provide further details on next steps.
Newsom said the goal is to “stabilize the situation as quickly as possible, protect jobs, people’s livelihoods and the entire innovation ecosystem that has served as the backbone of our economy.”
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Associated Press reporter Hope Yen contributed to this report from Washington.