US Treasury Secretary Janet Yellen has stated that the Biden administration is working with regulators to assist depositors affected by the recent collapse of Silicon Valley Bank (SVB) but made it clear that there would be no bailout for the bank.
Yellen reassured the public that the $23tn US banking system is well-capitalised and safe, and conditions do not match the 2008 financial crisis, when the failure of large institutions threatened to bring down the global financial system.
SVB, a California-based bank primarily lending to tech start-ups, was put under the control of the Federal Deposit Insurance Corporation (FDIC) on Friday after a run on the bank last week. While the FDIC guarantees deposits up to $250,000, some companies and individuals stand to lose more than half of deposits in excess of that, according to some estimates.
Senator Mark Warner has said that a run on the bank was accelerated by “some actors” and that talks with regulators, the White House, and the Federal Reserve were ongoing. He added that the best outcome would be to find a buyer for SVB assets before markets opened in Asia late on Sunday.
Progressive Congressman Ro Khanna has called on the government to ensure “all depositors will be protected and have full access to their accounts [on] Monday morning”.
However, Yellen’s rejection of a bailout may increase fears of a domino effect on other banks if regulators do not find a buyer for SVB assets. Nevertheless, current and former financial officials in Washington indicated the SVB collapse did not warrant intervention, and the Fed and FDIC were considering the creation of a fund to backstop deposits at banks that run into trouble.
