US Treasury Secretary Janet Yellen on Sunday (March 12) ruled out a government bailout for the collapsed Silicon Valley Bank. Which she said that the government wanted to avoid a financial “contagion” from implosion of the bank, a bailout was out of the question.
“We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” Yellen said during an interview with CBS.
On Friday, US regulators pulled the plug on SVB — a key lender to US startups since the 1980s — after a run on deposits made it no longer tenable for the medium-sized bank to stay afloat on its own.
Yellen said reforms made after the 2008 financial crisis meant the government was not considering a bailout for SVB.
“During the financial crisis, there were investors and owners of systemic large banks that were bailed out… and the reforms that have been put in place means that we’re not going to do that again,” she said.
“But we are concerned about depositors and focused on trying to meet their needs.”
Following SVB’s disclosure on Wednesday, banking sector was punished by investors. The sector slumped 30 per cent in two sessions on Friday. Signature Bank, a cryptocurrency-exposed lender, which has lost a third of its value since Wednesday evening.
Yellen said on Sunday that the government was working with the US deposit guarantee agency, the FDIC, on a “resolution” of the situation at SVB, where approximately 96 percent of deposits are not covered by the FDIC’s reimbursement guarantee.
“I’m sure they (the FDIC) are considering a wide range of available options that include acquisitions,” she said.
(With inputs from agencies)
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