U.S. Treasury Secretary Janet Yellen speaks at the Financial Stability Oversight Committee (FSOC) meeting at the Treasury Department, Friday, Dec. 16, 2022, in Washington, DC, U.S.
Ding Shen | Bloomberg | Good pictures
U.S. Treasury Secretary Janet Yellen said Sunday she was working to “resolve the situation in a timely manner” after regulators closed a Silicon Valley bank on Friday and seized its deposits, but a major government bailout was off the table.
“Let me be clear that during the financial crisis, the investors and the owners of the big banks were bailed out, and now that the reforms have been put in place, we’re not going to do that again,” Yellen told CBS. “Face the Nation.” “But we care about depositors and are focused on meeting their needs.”
SVB’s spectacular breakout began late Wednesday, when news that it needed to raise $2.25 billion to shore up its balance sheet surprised investors. Reassurances from SVB’s CEO were not enough to stop the bank run, and depositors withdrew more than $42 billion. Thursday resultsIt set the stage for the second largest bank failure in US history.
Federal Deposit Insurance Corporation (FDIC) Friday said It will insure up to $250,000 per depositor and can start paying those depositors from Monday. But most of SVB’s clients were businesses with uninsured sums in the bank, prompting wider concern about how people could recover their remaining funds.
Yellen said regulators are considering a wide range of options for SVB, including a takeover.
“This is really a decision for the FDIC as it decides what is the best way to resolve this institution,” Yellen said.
Former FDIC Chair Sheila Byr said finding a buyer for SVB was an “excellent outcome.”
“The problem is, it’s a liquidity failure, it’s a bank run, so they don’t have time to market the bank,” he told NBC’s “Meet the Press.” “They have to do it now and are playing catch-up.”
SVP’s decline may be far from over. Startups may not be able to pay employees in the days to come, venture capitalists may struggle to raise funds, and an already battered sector could face deep grief.
Bayer said the FDIC can help payday institutions if there is a legitimate risk exception, which is an “unusual practice.” He said he thought it would be “difficult to say it’s legitimate in any way.”
Sen. Mark Warner, D-Va., said Sunday that the best decision is to find a buyer for SVB before markets open in Asia. Warner said he was more optimistic than Saturday afternoon that the FDIC would find a solution.
“The shareholders in the bank are going to lose their money, let’s be clear about that. But the depositors can be taken care of,” he said on ABC’s “This Week.”