According to Treasury Secretary Janet Yellen, the federal government won’t save Silicon Valley Bank, but it is working to assist depositors worried about their money.
The Federal Deposit Insurance Corporation only covers deposits up to $250,000; many businesses and well-to-do individuals patronizing the bank, which is renowned for its connections to technology startups and venture capital, had more money in their accounts than that.
There are worries that some employees across the nation won’t get paid.
In an interview with CBS’ “Face the Nation,” Yellen gave scant information about the government’s upcoming actions.
However, she stressed that the current circumstance differed significantly from the financial crisis nearly 15 years ago, resulting in bank bailouts to safeguard the sector.
“We won’t do that again,” she declared. But we have depositors in mind and are working hard to meet their needs.
Yellen attempted to reassure Citizens that there won’t be a domino effect following the failure of Silicon Valley Bank while Wall Street was alarmed.
She said that the US banking system was highly secure and well-capitalized. It is tenacious.
The 16th-largest bank in the country is Silicon Valley Bank. After the demise of Washington Mutual in 2008, it was the second-largest bank failure in American history.
Most of the bank’s clients were venture capital-backed businesses, including some of the most well-known names in the sector.
When its clients, mainly technological companies in need of money as they struggled to obtain financing, started withdrawing their deposits, Silicon Valley Bank went bankrupt.
The bank had to sell bonds at a loss to pay for the withdrawals, which resulted in the most significant financial institution failure in the United States since the height of the financial crisis.
According to Yellen, Silicon Valley Bank’s main issue is rising interest rates, which the Federal Reserve has raised to fight inflation.
As speeds increased, several of its assets, including bonds and mortgage-backed securities, lost market value.
She asserted that the tech sector doesn’t primarily cause the issues at this bank.