Janet Yellen, US Treasury secretary, spoke during a meeting of the Financial Stability Oversight Council (FSOC) at the Treasury Department in Washington, DC, USA, on Friday, December 16, 2022.
Ting Shen Bloomberg Getty Images
After regulators shut down Silicon Valley Bank and seized deposits on Friday, US Treasury Secretary Janet Yellen said on Sunday that she was working “to deal with the situation in an appropriate manner,” but a major government bailout was off the table.
“Let me make it clear that during the financial crisis, there were investors and owners of big systemic banks that were bailed out, and the reforms we’ve put in place mean we’re not going to do that again,” Yellen told CBS. ‘ “Facing the Nation.” “But we are concerned about our depositors and are focused on meeting their needs.”
SVB’s spectacular implosion began late Wednesday, when it surprised investors with the news that it is necessary to raise $2.25 billion to shore up the balance sheet. Reassurances from the SVB CEO were not enough to stop the bank run, and depositors withdrew more than $42 billion by the end of the day on Friday, setting the stage for the second largest bank failure in US history.
The Federal Deposit Insurance Corporation (FDIC) said there will cover up to $250,000 per depositor and can start paying those depositors as early as Friday. But the majority of SVB’s customers are businesses that keep uninsured amounts at the bank, which has raised concerns about how people can take out more funds.
Yellen said the regulator is considering a wide range of options for SVB, including acquisitions.
“It’s really a decision for the FDIC, because it’s deciding what’s best for this company,” Yellen said.
Former FDIC Chairman Sheila Bair said that finding a buyer for SVB “is the best result.”
“The problem is a liquidity failure, it’s a bank, so they don’t have time to prepare for the bank market,” Bair told NBC’s “Meet the Press.” “They have to do it now and play catch up.”
The fallout from SVB’s collapse may be far-reaching. Startups may not be able to pay employees in the coming days, venture investors may struggle to raise funds, and already battered sectors may face deeper malaise.
Bair said the FDIC could help companies with payroll if there is a systemic risk exemption, which would be an “extraordinary procedure.” He said he would be “difficult to say that this is systemic in any way.”
Sen. Mark Warner, D-Va., said Sunday that the best outcome would be to find a buyer for SVB before the market opens in Asia. Warner said he was more optimistic that the FDIC would find a solution than Saturday afternoon.
“The shareholders in the bank are going to lose money, let’s be clear about that. But the depositors can be taken care of,” said ABC’s “This Week.”