US Treasury Secretary Janet Yellen has ruled out a government bailout of the collapsed Silicon Valley Bank (SVB), which was shut down by regulators on Friday. Yellen explained that the reforms implemented after the 2008 financial crisis were aimed at avoiding the need for government bailouts.
The government is not considering a bailout for SVB, says Yellen
US Treasury Secretary Janet Yellen stated in an interview on CBS News, broadcast on Sunday, that the government is not considering a bailout for the collapsed Silicon Valley Bank (SVB). The bank was closed by regulators on Friday and placed in receivership by the Federal Deposit Insurance Corporation (FDIC).
Yellen was asked if the US government needs to “step in and take emergency action because of the SVB failure.” The Treasury Secretary responded: “America’s economy is built on a safe and sound banking system that can meet the credit needs of our homes and businesses. So any time a bank fails, especially one like Silicon Valley Bank with billions of dollars in deposits, it’s clearly a concern.” She continued:
I have been working all weekend with our banking regulators to devise appropriate policies to address this situation.
Yellen explained that after the 2008 financial crisis, “unique controls” were put in place to improve capital and liquidity supervision, and tested during the early days of the Covid-19 pandemic. The system “demonstrated its resilience so that Americans can have confidence in the safety and soundness of our banking system,” she said.
Responding to a question about whether she has “ruled out” a government bailout of Silicon Valley Bank, the Treasury secretary detailed:
Let me make it clear that during the financial crisis, there were investors and owners of large systemic banks that were bailed out, and we’re certainly not looking. And the reforms that have been put in place mean we’re not going to do that again.
While noting that she cannot provide any further details on SVB’s situation at this time, Yellen insisted: “The US banking system is really safe and well capitalized. It is resistant.”
Yellen acknowledged that the government is “very aware that a lot of start-ups have deposits and venture capital firms have deposits with this bank that have been affected by their failure,” stressing that “this is something we are working on to try to solve.”
Following the collapse of Silicon Valley Bank, billionaire Bill Ackman, CEO and portfolio manager at Pershing Square Capital Management, warned of the “vast and profound” consequences of the US government allowing the bank to fail without protecting to all depositors. He also warned of potential bank runs beginning Monday. Meanwhile, Rich Dad Poor Dad author Robert Kiyosaki has warned that another bank is about to collapse.
What do you think of the statements by the US Treasury Secretary, Janet Yellen? And do you think the government should bail out SVB? Let us know in the comments section.
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