Washington
CNN
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Treasury Secretary Janet Yellen on Sunday ruled out a federal bailout of Silicon Valley Bank after its spectacular collapse last week.
“Let me clarify that during the financial crisis, there were investors and owners of large, systemic banks that were bailed out, and we’re certainly not looking,” Yellen told CBS News when asked. there would be a bailout. “And the reforms that have been put in place mean we’re not going to do it again.”
Also on Sunday, Shalanda Young, director of the White House Office of Management and Budget, pointed out in a “State of the Union” interview with CNN’s Kaitlan Collins that the U.S. banking system as a whole is now “more resistant”.
“He has a better base than before the [2008] financial crisis. This is largely due to the reforms that have been put in place,” Young said on “State of the Union.”
Yellen said she heard from applicants all weekend, many of which are “small businesses” and employ thousands of people. “I have been working all weekend with our banking regulators to design appropriate policies to deal with this situation,” the Treasury Secretary said, declining to provide further details.
SVB collapsed on Friday morning after a staggering 48 hours in which a bank run and capital crisis led to the second-largest financial institution failure in US history.
California regulators shut down the tech lender and placed it under the control of the US Federal Deposit Insurance Corporation. The FDIC acts as a receiver, which generally means that it will liquidate the bank’s assets to reimburse its customers, including depositors and creditors.
Although relatively unknown outside of Silicon Valley, SVB was among the top 20 U.S. commercial banks, with $209 billion in total assets at the end of last year, according to the FDIC. It is the largest lender to fail since Washington Mutual collapsed in 2008.
Despite initial panic on Wall Street over the run on SVB, which cratered its shares, analysts said the bank’s collapse is unlikely to trigger the kind of domino effect that gripped the banking industry during the financial crisis.
But the collapse has sparked a bailout debate in Washington as lawmakers weigh the fallout.
Republican Representative Nancy Mace of South Carolina told Collins in a separate ‘State of the Union’ interview that she did not support a bailout ‘at this time’, but warned: ‘It is still very early”.
“We cannot continue to bail out private companies because there are no consequences for their actions. People, when they make mistakes or break the law, need to be held accountable in this country,” she said.
House Speaker Kevin McCarthy told Fox News on Sunday that he had spoken to Yellen and Federal Reserve Chairman Jerome Powell about the collapse of SVB and believes “they have the tools to deal with the current situation.
“They know the seriousness of the situation and are working to make an announcement before markets open,” the California Republican said.
Another California representative, Democratic Rep. Ro Khanna, who represents much of Silicon Valley, said the Treasury Department needed to be more aggressive to ensure all SVB depositors would have access to their money.
“The principle should be that all depositors will be protected and have full access to their accounts on Monday morning,” Khanna told CBS News.
Khanna also clarified that investors and shareholders of SVB, which is headquartered in his district, should not be bailed out.
“I have no sympathy for the leaders, no sympathy for the people who have shares there. But the depositors are protected,” he said.
Democratic Rep. Josh Gottheimer of New Jersey, a member of the House Financial Services Committee, sent a letter Sunday to Yellen, Powell, FDIC Chairman Martin Gruenberg and Michael Hsu, the acting chief of the Office of the Comptroller of the Currency, calling for them to “act quickly”.
Gottheimer recommended that the FDIC prioritize finding a buyer for SVB “who has the resources to ensure a seamless transition for the bank’s depositors and borrowers,” according to a copy of the letter obtained by CNN.
Kevin Cramer, a member of the Senate Banking Committee, said he hoped SVB’s collapse would be “very localized and we can address it that way.”
“The problem is that we live in very emotional times, where markets are emotional. The reference to social media as being an accelerator, if you will, of some of that emotion, I think, can be problematic,” said the North Dakota Republican told NBC News, “But hopefully with the weekend came some calm and certainly some strategy as well.”
This story has been updated with additional reaction.
