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WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen on Sunday said she was working closely with banking regulators to respond to the collapse of Silicon Valley Bank and protect depositors, but a major bailout was not being considered.
Yellen told the CBS News “Face the Nation” show that she had been working with regulators to “design appropriate policies to address the situation,” the largest bank collapse since the 2008 financial crisis, but declined to give further details.
“Let me be clear that 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 we are not going to do that again,” Yellen told CBS.
“But we are concerned about depositors and are focused on trying to meet their needs,” Yellen said.
California banking regulators on Friday closed SVB, appointing the Federal Deposit Insurance Corporation (FDIC) as receiver to protect depositors at the startup-focused lender.
The collapse of the startup-focused bank has raised concerns about runs on regional banks, and the ability of small businesses that banked with SVB to pay their employees.
Yellen met on Friday with officials from the FDIC and the Office of the Comptroller of the Currency to address the bank’s collapse, and she and White House officials expressed confidence in the ability of banking regulators to respond.
On Sunday, she sought to reassure Americans that the U.S. banking system was safe, better capitalized and more resilient than during the 2008 global financial crisis, given new controls and capital requirements put in place after 2008 and tests during the early days of the COVID-19 pandemic.
“Americans can have confidence in the safety and soundness of our bank system,” Yellen said, adding that regulators wanted to ensure that the crisis did not spread to other banks.
“We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” she said.
Asked if the U.S. government would consider the acquisition of SVB by a foreign bank, Yellen said: “So this is really a decision for the FDIC, as it decides on what the best course is to resolve this firm. And I’m sure they’re considering a wide range of available options. That would include acquisitions.
The FDIC stepped in Friday to protect the deposits of up to $250,000, but deposits over that amount – which accounted for 85% of SVB accounts – are at risk.
Asked if depositors should be paid back in full, Yellen declined to comment on the details. “We’re very aware of the problems that depositors will have. Many of them are small businesses, that employ people across the country. Of course this is a significant concern.”
More than 3,500 CEOs and founders representing some 220,000 workers have signed a petition appealing directly to Yellen and others to backstop depositors and warning that more than 100,000 jobs could be at risk.
Venture investors have advised startups to seek alternatives to gain short-term liquidity.
