Washington (CNN) Treasury Secretary Janet Yellen ruled out a federal bailout for Silicon Valley Bank on Sunday. Following its spectacular decline Last week.
“During the financial crisis, the investors and the owners of the big banks bailed out, and we certainly don’t see that,” Yellen told CBS News when asked if a bailout would happen. “And the reforms brought in mean we’re not going to do that again.”
On Sunday, Shalanda Young, director of the White House Office of Management and Budget, insisted that the U.S. banking system is currently “very stable” in an interview with CNN’s Kaitlan Collins titled “State of the Union.”
“It has a better foundation than before [2008] Financial crisis. “It’s mostly due to reforms,” Young said on “State of the Union.”
Yellen said she has been hearing from depositors all weekend, many of whom are “small businesses” that employ thousands of people. “I have been working with our banking regulators throughout the weekend to design appropriate policies to address this situation,” the Treasury secretary said, declining to provide further details.
SVP It collapsed on Friday morning After a shocking 48 hours, a bank run and a capital crisis led to the second largest failure of a financial institution in US history.
Confusion fueled by high interest rates led to an old-fashioned bank run on Thursday, in which depositors withdrew $42 billion from SVB.
When the FDIC took control of the bank on Friday, it said it would pay customers on Monday their insured deposits, which are limited to $250,000. But a lot of money — and influence — is at stake.
SVB has funded nearly half of US venture-backed technology and health care companies. At the end of 2022, the bank said it had $151.5 billion in uninsured deposits, of which $137.6 billion were with U.S. depositors.
While a lot of money may have come in during the bank run and customers may get some uninsured funds as the government liquidates SVB, it is not yet certain whether they will be able to get their money back.
Relatively unknown outside Silicon Valley, SVB was one of the top 20 U.S. commercial banks with total assets of $209 billion at the end of last year, according to the FDIC. It was the largest lender to fail since Washington Mutual collapsed in 2008.
Congress reacts
Despite initial panic on Wall Street, which saw the run on SVB sink its shares, analysts said the bank’s collapse was unlikely to cause the domino effect that gripped the banking sector during the financial crisis.
But there is a decline The bailout has sparked debate in Washington Lawmakers are assessing the fallout.
Representative Nancy Mays, Republican of South Carolina, told Collins in a separate interview on “State of the Union” that she does not support a bailout “at this time” but cautioned that “it’s still early.”
“Private companies cannot be bailed out because there are no consequences for their actions. People, if they make a mistake or break the law, must be held accountable in this country,” he said.
House Speaker Kevin McCarthy told Fox News on Sunday that he had spoken with Yellen and Federal Reserve Chairman Jerome Powell about the collapse of the SVB and that he believed “they have the tools to handle the current situation.”
“They know the seriousness of this, and they’re trying to make some announcements before the markets open,” the California Republican said.
Another Californian Democrat representing much of Silicon Valley. Ro Khanna said the Treasury Department should be more proactive in ensuring that all depositors in SVB have access to their money.
“The policy should be that all depositors will be protected and have full access to their accounts on Monday morning,” Khanna told CBS News.
Khanna also made it clear that the investors and shareholders of his district-headquartered SVB should not be bailed out.
“I have no sympathy for the administrators, no sympathy for the people who have the balance there. But the depositors are protected,” he said.
Representative Josh Gottheimer, Democrat of New Jersey, a member of the House Financial Services Committee, sent a letter Sunday to Yellen, Powell, FDIC Chairman Martin Grunberg and Office of the Comptroller of the Currency Acting Chairman Michael Hsu. They “must act quickly.”
According to a copy of the letter obtained by CNN, Gottheimer recommended that the FDIC prioritize finding a buyer for SVB that “has the resources to provide a seamless transition for the bank’s depositors and borrowers.”
Senate Banking Committee member Kevin Cramer said he believes SVB’s collapse is “so localized that we can address it that way.”
“The problem is we’re living in a very emotional time where the markets are emotional. To suggest that social media is an accelerator, if you will, of some of that emotion, I think, can be problematic,” the North Dakota Republican said. NBC News. “But hopefully the weekend brought some calm and certainly some strategy.”
This story has been updated with additional reaction.
CNN’s David Goldman, Andrew Millman, Eileen Greif, Alison Morrow, Matt Egan, Alaina Treen and Jack Forrest contributed to this report.
