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Yellen: Working to address SVB collapse, but not looking at bailout
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
Employees walk in front of a sign outside of the shuttered Silicon Valley Bank (SVB) headquarters in Santa Clara, California. Silicon Valley Bank was shut down on Friday morning by California regulators and was put in control of the US Federal Deposit Insurance Corporation. — AFP
US Treasury Secretary Janet Yellen on Sunday said 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 CBS News “Face the Nation” show that she had been working with regulators to “design appropriate policies to address the situation,” but declined to give further details.
“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out...and the reforms that have been put in place means we are not going to do that again,” Yellen told the CBS News Sunday Morning show.
“But we are concerned 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 the ability of banking regulators to respond.
Yellen emphasized that the U.S. bank system was safe and well-capitalised, given new controls and capital requirements put in place after the 2008 financial crisis, and had been tested during the early days of the Covid-19 pandemic.
“Americans can have confidence in the safety and soundness of our bank system,” Yellen said, adding that regulators wanted to ensure that 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 accounted for 85 per cent of SVB accounts - are at risk.
Asked if depositors should be paid back in full, Yellen declined to comment on the details. “We’re very aware of the problems that depositors will have. Many of them are small businesses, that employ people across the country. Of course this is a significant concern.”
More than 3,500 CEOs and founders representing some 220,000 workers have signed a petition started by Y Combinator appealing directly to Yellen and others to backstop depositors, warning that more than 100,000 jobs could be at risk, the petition warned.
Venture investors have advised startups to seek alternatives to gain short-term liquidity. — Reuters
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