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After Silicon Valley Bank Collapses, Yellen Says The Bank Won’t Get a Bailout

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After Silicon Valley Bank Collapses, Yellen Says The Bank Won't Get a Bailout

(CTN News) – Janet Yellen, US Treasury secretary, said Sunday that Silicon Valley Bank would not receive a bailout, but the Biden administration would work closely with regulators to help depositors.

Yellen said conditions are different from the 2008 financial crisis. She said regional banks could also affect the $23tn US banking system.

American banks are safe, well-capitalised, and resilient. Banking systems are safe and sound.

During the financial crisis, large banks and investors were bailed out. The reforms in place mean that we will not do that again.

Trying to meet depositor needs is our priority.”

According to Reuters, the US government plans to announce “material” measures to shore up SVB deposits.

Yellen said the trouble at one bank should not spread to others that are sound.

Investors and regulators were rattled by SVB’s sudden failure, a $212bn bank primarily lending to start-ups.

Friday, Silicon Valley Bank was placed under FDIC control, which guarantees deposits up to $250,000. Some estimates predict over half of deposits over that will be lost.

“Some actors” accelerated last week’s $40bn withdrawal, said Democrat Senator Mark Warner of Virginia.

The Federal Reserve and the White House were consulted. Markets in Asia should open late on Sunday, he said.

The bank’s shareholders will lose their money, he said. Let’s be clear. It will be best to acquire SVB to take care of the depositors.”

Shareholders of [Silicon Valley Bank] ought to lose money, Warner said. There have been questions about moral hazard with depositors.

Progressive congressman Ro Khanna called on the government to ensure “all depositors will have full access to their accounts” on Monday.

In an ideal scenario, Khanna said, SVB would be acquired privately by Washington with guarantees.

They must act decisively. A ticking clock,” he said.

Khanna said Silicon Valley Bank chief executive Gregory Becker sold $3.6 million in stock weeks before the collapse and “the money should be clawed back”.

According to Charles Gasparino, a Fox Business commentator, depositors of Silicon Valley Bank will receive 30% to 50% of their money “on Monday” with the rest over time.

OM&B director Shalanda Young said the situation was being taken “seriously” and tried to calm fears about regional banks.

As a result of the reforms put in place after the financial crisis, Young says the foundation of the system is stronger than before the financial crisis.

Yellen’s rejection of a bailout could increase fears of a domino effect on other banks. Washington officials indicated that intervention was not warranted in the SVB collapse. In a $23tn industry, SVB is a $200bn bank, says former FDIC chair Sheila Bair.

“I don’t think this is systemic,” she said.

Bloomberg reported the Fed and FDIC were considering a fund to protect deposits at troubled banks.

Biden spoke with Newsom on Saturday, according to the White House.

As quickly as possible, everyone is assisting the FDIC.

An SVB-style bankruptcy is unlikely to affect large banks, says Kroll. Silicon Valley Bank uninsured depositors may face problems, a risk “much greater if uninsured depositors aren’t repaid”.

Signature Bank, First Republic Bank, Western Alliance and PacWest have seen values plunge.

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