U.S. Treasury Secretary Janet Yellen denied a government bailout for the failed Silicon Valley Bank (SVB), which was closed by regulators Friday. Yellen explained that reforms implemented after the 2008 financial crisis were aimed at preventing the need for a government bailout.
The government is not considering a bailout of SVB, Yellen said
U.S. Treasury Secretary Janet Yellen said in an interview with CBS News that aired Sunday that she is not considering a bailout for the failed Silicon Valley Bank (SVB). The bank was closed by regulators on Friday and placed into receivership by the Federal Deposit Insurance Corporation (FDIC).
Yellen was asked if the U.S. government “needs to intervene and take emergency measures because of SVB’s failure.” The Treasury Secretary replied.
“The U.S. economy depends on a safe and sound banking system that can meet the credit needs of households and businesses. So whenever a bank, especially one with billions of dollars in deposits like Silicon Valley Bank, fails, it is clearly a concern.” She continued.
I have been working all weekend with banking regulators to design appropriate policies to address this situation.
Yellen explained that “unique controls” were put in place after the 2008 financial crisis to strengthen oversight of capital and liquidity, and that they were tested early in the Covid-19 pandemic. The system “proved resilient, so Americans can have confidence in the safety and soundness of the banking system,” she argued.
When asked if she was “ruling out” a government bailout of Silicon Valley Bank, the Treasury Secretary elaborated.
Let me be clear that there were investors and owners of large systemic banks that were bailed out during the financial crisis, but we certainly did not see it. And the reforms that have been implemented mean that we do not intend to do that again.
Yellen said she could not elaborate on the SVB situation at this time, but insisted that “the American banking system is really safe and well capitalized. It is resilient.”
Yellen acknowledged that the government is “well aware that many startups have deposits and venture capital firms have deposits in this bank that are affected by the collapse,” and stressed that “this is something we are trying to fix.”
In the wake of the Silicon Valley Bank failure, billionaire Bill Ackman, CEO and portfolio manager of Pershing Square Capital Management, warned that if the U.S. government allows the bank to fail without protecting all depositors, “the vast and profound ” consequences, he warned. He also warned that banks could go bankrupt starting Monday. Meanwhile, Robert Kiyosaki, author of “Rich Dad, Poor Dad,” warned that another bank will fail.
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