U.S. Treasury Secretary Janet Yellen is reportedly working with regulators to resolve the Silicon Valley bank failure and protect investors, but isn't considering a massive bailout.
Yellen made the comments in a March 12 interview with CBS News, claiming that regulators are designing "appropriate policies" for banks to address the situation. she says: "During the financial crisis, investors and owners of the systemically large banks were bailed out, and we are certainly not looking for that. The reforms that have been put in place mean we won't be doing that again. But we are concerned about depositors and are focused on satisfying their needs."
Regarding the fact that most of SVB's accounts are unsecured, Yellen noted that the regulator is "very aware of the problems that depositors will have, many of which are small businesses that employ employees across the country. Of course, this is a significant problem , and working with regulators to try to address these issues."
Yellen also addressed the possibility that other regional U.S. banks could be affected by the Silicon Valley meltdown: "Suffice it to say, we want to make sure that what's wrong with one bank doesn't spread to other healthy banks. The goal of oversight and regulation is always to make sure that contagion doesn't happen."
According to Cointelegraph, Small banks in the U.S. had $6.8 trillion in assets and $680 billion in equity as of February 2023, according to the Federal Reserve. The tech bank's failure would risk "thousands of small bank runs. Silicon Valley Bank is one of the top 20 banks in the US and provides banking services to many crypto-friendly venture capital firms. Assets from Web3 venture capitalists total more than $6 billion at the bank, including $2.85 billion from Andreessen Horowitz, $1.72 billion from Paradigm and $560 million from Pantera Capital, according to a Castle Hill report.
Yellen said the FDIC is considering a "broad range of available options," including allowing foreign banks to acquire SVB. "We're certainly working to resolve this in a timely manner," she noted.
Silicon Valley was shut down by California financial regulators on March 10 after announcing a massive asset and stock sale to raise $2.25 billion to shore up operations. The FDIC is appointed as a receiver to protect the insured deposit. However, the FDIC can only insure up to $250,000 per depositor, per institution, and per ownership class.
