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Treasury Secretary Janet Yellen says U.S. government won’t bail out Silicon Valley Bank

Janet Yellen, US Treasury secretary, speaks throughout a Monetary Stability Oversight Council (FSOC) assembly on the Treasury Division in Washington, DC, US, on Friday, Dec. 16, 2022.

Ting Shen | Bloomberg | Getty Pictures

After regulators shuttered Silicon Valley Financial institution and seized its deposits Friday, U.S. Treasury Secretary Janet Yellen mentioned Sunday that she has been working “to handle the scenario in a well timed means,” however {that a} main authorities bailout just isn’t on the desk.

“Let me be clear that through the monetary disaster, there have been traders and house owners of systemic giant banks that have been bailed out, and the reforms which have been put in place implies that we’re not going to try this once more,” Yellen instructed CBS’ “Face the Nation.” “However we’re involved about depositors and are targeted on making an attempt to fulfill their wants.”

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SVB’s spectacular implosion started late Wednesday, when it shocked traders with information that it wanted to boost $2.25 billion to shore up its stability sheet. Reassurances from SVB’s CEO weren’t sufficient to cease the financial institution run, and depositors withdrew greater than $42 billion by the finish of the day Thursday, setting the stage for the second-largest financial institution failure in U.S. historical past.

The Federal Deposit Insurance coverage Company (FDIC) mentioned Friday that it’ll cowl as much as $250,000 per depositor and could possibly start paying these depositors as early as Monday. However the overwhelming majority of SVB’s prospects have been companies that had saved far larger uninsured quantities on the financial institution, which sparked broad issues about how individuals will be capable to retrieve the remainder of their funds.

Yellen mentioned regulators are contemplating a variety of choices for SVB, together with acquisitions.

“That is actually a choice for the FDIC, because it decides on what one of the best course is to resolve this agency,” Yellen mentioned.

Former FDIC Chair Sheila Bair mentioned Sunday that discovering a purchaser for SVB is “one of the best consequence.”

“The issue is that this was a liquidity failure, it was a financial institution run, in order that they did not have time to arrange to market the financial institution,” Bair instructed NBC’s “Meet the Press.” “They’re having to try this now and enjoying catch up.”

The fallout of SVB’s collapse may very well be far-reaching. Startups could also be unable to pay staff within the coming days, enterprise traders might battle to boost funds, and an already-battered sector might face a deeper malaise.

Bair mentioned the FDIC might assist corporations with payroll within the case that there is a systemic danger exception, which might be “a unprecedented process.” She mentioned she thinks it’s going to be “onerous to say that that is systemic in any means.”

Sen. Mark Warner, D-Va., mentioned Sunday that one of the best consequence could be discovering a purchaser for SVB earlier than the markets open in Asia. Warner mentioned he’s feeling extra optimistic that the FDIC will discover a resolution than he was Saturday afternoon.

 “The shareholders within the financial institution are going to lose their cash, let’s be clear about that. However the depositors could be taken care of,” he instructed ABC’s “This Week.”