Janet Yellen, U.S. Secretary of the Treasury, speaks during a meeting of the Financial Stability Oversight Council (FSOC) at the Treasury Department in Washington, DC, U.S., Friday, December 16, 2022.
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After regulators shut down Silicon Valley Bank and seized its deposits on Friday, US Treasury Secretary Janet Yellen said on Sunday that she has been working “to resolve the situation in a timely manner” but that a major government bailout is not on the table.
“Let me be clear that during the financial crisis there were investors and owners of systemically large banks that were bailed out, and the reforms that have been put in place mean that we’re not going to do that again,” Yellen told CBS. “Sign against the nation.” “But we are concerned about depositors and are focused on trying to meet their needs.”
SVB’s spectacular implosion began late Wednesday when it surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet. Assurances from SVB’s chief executive were not enough to stop the bank run, and depositors withdrew more than $42 billion by the end of the day Thursday, setting the stage for the second-largest bank failure in U.S. history.
The Federal Deposit Insurance Corporation (FDIC) said Friday it will cover up to $250,000 per depositors and may start paying those depositors as early as Monday. But the vast majority of SVB’s customers were companies that had kept much larger uninsured amounts in the bank, triggering widespread concern about how people will be able to retrieve the rest of their funds.
Yellen said regulators are considering a wide range of options for SVB, including acquisitions.
“This is really a decision for the FDIC as it decides what the best path is to resolve this company,” Yellen said.
Former FDIC Chairman Sheila Bair said Sunday that finding a buyer for SVB is “the best outcome.”
“The problem is, this was a liquidity failure, it was a bank run, so they didn’t have time to prepare to market the bank,” Bair told NBC’s “Meet the Press.” “They have to do it now and play catch up.”
The fallout from SVB’s collapse could be far-reaching. Startups may not be able to pay employees in the coming days, venture investors may struggle to raise funds, and an already battered sector may face deeper malaise.
Bair said the FDIC could help companies with wages in the event that there is an exception for systemic risk, which would be “an extraordinary procedure.” She said she thinks it’s going to be “hard to say this is systemic in any way.”
Late. Mark Warner, D-Va., said Sunday that the best outcome would be to find a buyer for SVB before markets open in Asia. Warner said he feels more optimistic that the FDIC will find a solution than he was Saturday afternoon.
“The shareholders of the bank are going to lose their money, let’s be clear about that. But the depositors can be taken care of,” he told ABC’s “This Week.”