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WASHINGTON: US Treasury Secretary Janet Yellen said on Sunday that she was working closely with banking regulators to respond to the collapse of Silicon Valley Bank and protect depositors, but a major bailout was not being considered.
Yellen told the CBC News “Face of the Nation” indicates that it has been working with regulators to “design appropriate policies to address the situation,” but declined to provide further details.
“Let me be clear, during the financial crisis, there were investors and owners of big systemic banks bailed out… and the reforms that have been put in place mean that we are not going to do that again,” Yellen told the company. CBC News Sunday Morning Show.
“But we care about depositors and are focused on trying to meet their needs,” Yellen said.
The collapse of the startup-focused bank has raised concerns about runs on regional banks, and the ability of small businesses that banked with SVB to pay their employees.
Yellen met with officials from the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, and she and White House officials expressed confidence in banking regulators’ ability to respond.
Yellen emphasized that the US banking system is safe and well capitalized, given new controls and capital requirements put in place after the 2008 financial crisis, and that it was tested during the early days of the COVID pandemic -19.
“Americans can have confidence in the safety and soundness of our banking system,” Yellen said, adding that regulators wanted to ensure the crisis did not spread to other banks.
The Federal Deposit Insurance Corp. stepped in Friday to protect the deposits of up to $250,000, but deposits over that amount — which made up 85% of SVB’s accounts — are at risk.
Asked whether depositors should be paid back in full, Yellen declined to comment on the details. “We are very aware of the problems that depositors will have. Many of them are small businesses, employing people all over the country. Of course this is a significant concern.”
More than 3,500 CEOs and founders representing about 220,000 workers have signed a petition started by Y Combinator directly appealing to Yellen and others to abandon depositors, warning that more than 100,000 jobs could be in danger, the petition warned.
Venture investors have advised startups to look for alternatives to gain short-term liquidity.
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