Ajit Karn
The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy individuals who used the bank — renowned for its relationships with technology startups and venture capital — had deposits in excess of that amount. There are concerns that some workers across the nation will not be paid.
Treasury Secretary Janet Yellen stated on Sunday that the federal government will not bail out Silicon Valley Bank, but will assist depositors who are concerned about their finances.
The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy individuals who used the bank — renowned for its relationships with technology startups and venture capital — had deposits in excess of that amount. There are concerns that some workers across the nation will not be paid.
In an interview with CBS’s “Face the Nation,” Yellen offered few specifics regarding the government’s next steps. However, she emphasised that the current situation was very different from the financial crisis that occurred nearly fifteen years ago, which resulted in bank bailouts to protect the industry.
“We will never do that again,” “She stated, “However, we are concerned about depositors and endeavour to meet their needs.”
After the collapse of Silicon Valley Bank, Treasury Secretary Janet Yellen attempted to reassure Americans that there would be no domino effect.
“The American banking system is extremely secure and adequately capitalised.” “She stated, “It’s durable.”
Silicon Valley Bank is the sixteenth largest bank in America. It was the second largest bank failure in American history, following the 2008 collapse of Washington Mutual. The majority of the bank’s clients were technology workers and venture capital-backed businesses, including some of the industry’s most recognisable brands.
Silicon Valley Bank began its descent into insolvency when its customers, who were primarily technology firms struggling to obtain financing, began withdrawing their deposits. To cover the withdrawals, the bank was forced to sell bonds at a loss, resulting in the largest failure of a U.S. financial institution since the height of the financial crisis.
Yellen identified the Federal Reserve’s decision to raise interest rates to combat inflation as Silicon Valley Bank’s primary problem. As interest rates rose, many of its assets, such as bonds and mortgage-backed securities, lost market value.
She stated, “The problems with the technology industry are not at the heart of the problems at this bank.”
Yellen predicted that regulators would consider a “vast array of available options,” including the acquisition of Silicon Valley Bank by another institution. To date, however, no buyer has presented themselves.
Friday, regulators seized the bank’s assets. The federal government-insured deposits are expected to be accessible by Monday morning.
“I spent the entire weekend working with our banking regulators to design policies to address this situation “Yellen said. “I cannot provide additional information at this time.”
President Joe Biden and Democratic California Governor Gavin Newsom discussed “efforts to address the situation” on Saturday, but the White House did not provide additional information regarding next steps.
Also read this:Following Saudi Arabia’s rapprochement, Maldives resumes diplomatic ties with Iran.
The objective was to “stabilise the situation as soon as possible in order to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as the fulcrum of our economy.”
