Washington (CNN) Treasury Secretary Janet Yellen on Sunday ruled out a federal bailout for Silicon Valley Bank following last week’s spectacular collapse.
“Let me be clear that investors and owners of systemic big banks were bailed out during the financial crisis, and we are certainly not looking,” Yellen told CBS News when asked if there will be a bailout. “And the reforms that have been made mean we’re not going to do that again.”
Also Sunday, in an interview with CNN’s Kaitlan Collins on “State of the Union,” Shalanda Young, the director of the White House Office of Management and Budget, stressed that the U.S. banking system as a whole is now “more resilient.”
“It has a better base than before [2008] financial crisis. That is largely due to the reforms that have been put in place,” Young said of “State of the Union.”
Yellen said she heard from savers all weekend, many of whom are “small businesses” and employ thousands. “I have been working with our banking regulators all weekend to design appropriate policies to address this situation,” said the finance minister, who declined to provide further details.
SVB collapsed Friday morning after a stunning 48 hours in which a bank run and capital crunch led to the second largest financial institution failure in US history.
The chaos caused by high interest rates led to an old-fashioned bank run on Thursday, with savers ripping $42 billion from the SVB.
When the FDIC took control of the bank on Friday, it said it would pay customers their insured deposits on Monday, which only covers up to $250,000. But there is a lot of money – and influence – at stake.
SVB provided financing to nearly half of the venture-backed technology and healthcare companies in the US. At the end of 2022, the bank said it had $151.5 billion in uninsured deposits, of which $137.6 billion was held by U.S. depositors.
While a lot of money may have come out during the bank run and customers may receive some uninsured money if the government liquidates SVB, they are still not sure if they can get all their money back.
While relatively unknown outside Silicon Valley, SVB was among the top 20 U.S. commercial banks with $209 billion in total assets, according to the FDIC at the end of last year. It is the largest lender to collapse since Washington Mutual collapsed in 2008.
Congress responds
Despite initial panic on Wall Street over the run on SVB, which sent the stock crashing, 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 assess the fallout.
Republican Representative Nancy Mace of South Carolina told Collins in a separate “State of the Union” interview that she does not support a bailout “at this point,” but cautioned, “It’s very early days.”
“We cannot continue bailing out private companies because their actions have no consequences. People who make mistakes or break the law should be held accountable in this country,” she said.
House Speaker Kevin McCarthy told Fox News on Sunday that he has spoken with Yellen and Federal Reserve Chairman Jerome Powell about the collapse of the SVB and believes “they have the resources to deal with the current situation.”
“They know the seriousness of this and they are working to come out with an announcement before the markets open,” said the California Republican.
Another California Democratic representative, Ro Khanna, who represents much of Silicon Valley, said the Treasury Department needs to be more aggressive in making sure all depositors at SVB have access to their money.
“The principle should be that all depositors are protected and have full access to their accounts by Monday morning,” Khanna told CBS News.
Khanna also made it clear that investors and shareholders in SVB, headquartered in his district, should not be bailed out.
“I have no sympathy for the executives, no sympathy for the people who own shares there. But the depositors are protected,” he said.
New Jersey Democratic Rep. Josh Gottheimer, a member of the House Financial Services Committee, sent a letter on Sunday to Yellen, Powell, FDIC Chairman Martin Gruenberg and Michael Hsu, the acting chief of the Office of the Comptroller of the Currency, saying he called on them to “act quickly”.
Gottheimer advised the FDIC to prioritize finding a buyer for SVB “who has the resources to provide a seamless transition for the bank’s depositors and borrowers,” according to a copy of the letter obtained by CNN.
Senate Banking Committee member Kevin Cramer said he hopes the collapse of the SVB is “very local and we can handle it that way.”
“The problem is we live in a very emotional time, where markets are emotional. The reference to social media as an accelerator, if you will, of some of that emotion, I think, can be problematic,” the Republican said. North Dakota. NBC news. “But I hope that the weekend brought some rest and certainly some strategy.”
This story has been updated with additional comments.
CNN’s David Goldman, Andrew Millman, Aileen Graef, Allison Morrow, Matt Egan, Alayna Treene and Jack Forrest contributed to this report.
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