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Janet Yellen, the U.S. Treasury Secretary, has confirmed that the Silicon Valley Bank (SVB) will receive help from the government. However, she has ruled out a bailout for the failed bank in response to calls for such action.
Yellen has reassured depositors she is working alongside other financial regulators to ensure their protection. She emphasized that there are no plans for a significant government bailout.
Yellen has highlighted the banking reforms implemented following the 2008 financial crisis as a reason bailouts are unnecessary. She stated that the U.S. banking system is now more resilient and better capitalized than in 2008.
On Sunday, Yellen said the federal government would not bail out the failed Silicon Valley Bank. This news came after reports revealed that the bank’s employees received bonuses shortly before the bank’s collapse on Friday.
The timing of the payments is coincidental, as they fell on the same day the bank collapsed. It is important to note that the bonuses were meant for the year 2022 and had been scheduled for paid out on March 10. While employees in other countries were supposed to receive their payments later in the month, it is still being determined whether the payments will proceed as planned now that the FDIC has taken control of the bank.
Depositors may only receive as little as 30% of their funds because of an anticipated run on the bank on Monday. Yellen explained during an appearance on CBS’ “Face the Nation” that the government would not rescue the 16th largest bank in the country as it had done with other institutions during the financial crisis in 2008. She emphasized that the reforms since then meant such bailouts would be avoided.
Silicon Valley Bank Faces Bank Run as Treasury Secretary Rules Out Bailout
Customers are expected to withdraw their money from Silicon Valley Bank on Monday, which the Federal Deposit Insurance Corp will cover. Yellen stated she worked with banking regulators over the weekend to create policies to address this situation, but couldn’t provide further details. Silicon Valley Bank employees received their annual bonuses just before they seized the bank on Friday.
The bank will distribute the bonuses on the second Friday of March for the previous year’s work, and they had planned the payments for several days, according to sources familiar with the matter. The collapse of Silicon Valley Bank has prompted the government to assess the situation and explore various options, including finding a buyer. The FDIC is reportedly attempting to merge SVB with another bank.
Secretary Yellen has confirmed that the agency is considering all available options to resolve the issue, including acquisition. Many have raised concerns about the effect of SVB’s collapse, with Y Combinator CEO Garry Tan warning that over 100,000 jobs may be at risk. Tan has urged startup CEOs and founders to petition the U.S. Treasury Secretary and other regulatory officials.
According to Gasparino, a columnist for the Washington Post, bank customers are likely to receive most of their funds back over time if no solution is found, either through complete FDIC coverage or a sale. Gasparino appeared on “Fox & Friends” to discuss the issue, stating that SVB’s collapse highlights the deep-rooted issues within our banking system and economy.
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