Treasury Secretary Janet Yellen listens as she testifies during a House Ways and Means committee hearing on President Joe Biden's fiscal year 2024 budget request, Friday, March 10, 2023, on Capitol Hill in Washington. (AP Photo/Mariam Zuhaib)
WILMINGTON, Del. (AP) – Treasury Secretary Janet Yellen said Sunday that the federal government would not bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money.
The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy people who used the bank – known for its relationships with technology startups and venture capital – had more than that amount in their account. There are fears that some workers across the country won’t receive their paychecks.
Yellen, in an interview with CBS’ “Face the Nation,” provided few details on the government’s next steps. But she emphasized that the situation was much different from the financial crisis almost 15 years ago, which led to bank bailouts to protect the industry.
“We’re not going to do that again,” she said. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”
Yellen tried to reassure Americans that there will be no domino effect after the collapse of Silicon Valley Bank.
“The American banking system is really safe and well capitalized,” she said. “It’s resilient.”
Silicon Valley Bank is the nation’s 16th-largest bank. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008. The bank served mostly technology workers and venture capital-backed companies, including some of the industry’s best-known brands.
Silicon Valley Bank began its slid into insolvency when its customers, largely technology companies that needed cash as they struggled to get financing, began withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest failure of a U.S. financial institution since the height of the financial crisis.
Yellen seemed to blame high interest rates more than trouble in the technology industry for the bank’s failure. “The problems with the tech sector aren’t at the heart of the problems at this bank,” she said.
Regulators seized the bank’s assets on Friday. Deposits that are insured by the federal government are supposed to be available by Monday morning.
“I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” Yellen said. “I can’t really provide further details at this time.”
President Joe Biden and Gov. Gavin Newsom, D-Calif., spoke about “efforts to address the situation” on Saturday, although the White House did not provide additional details on next steps.
Newsom said the goal was to “stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.”
