,‘I have been working throughout the weekend with our banking regulators to design appropriate policies to deal with the situation.’,
That’s Treasury Secretary Janet Yellen, speaking on “Face the Nation” on Sunday about the federal government’s plans to possibly stem the damage from the surprise collapse of Silicon Valley bank SIVB.
Which was taken over by the Federal Deposit Insurance Corporation on Friday.
“We want to make sure that the problems that exist at one bank don’t create contagion for others,” Yellen said in a “Face the Nation” interview on CBS. “We are concerned about depositors and are focused on trying to meet their needs,” she said.
SVB, which has built a reputation of catering to start-ups and early-stage companies in its 40 years of existence, was shut down in what was described as a wave of depositors pulling out their money in a very short period of time. The 2008 demise of Washington Mutual resulted in the second largest bank failure in US history.
Some are concerned that depositors may suffer the most from the SVB’s implosion because the majority of bank deposits, more than 90%, are uninsured.
The FDIC insures deposits up to $250,000.
The FDIC said SVB had about $209 billion in total assets and about $175.4 billion in total deposits as of the end of December, but it was unclear how much was on the bank’s balance sheet as of Friday. The FDIC said deposit holders would be able to withdraw up to $250,000 on Monday. For those with deposits above this amount, the FDIC provided a hotline number to call.
Problems for SVBs arise because the Federal Reserve is raising interest rates to combat inflation. Higher rates can move money out of plain-vanilla deposits and into higher-interest-bearing, but liquid, investments more compelling.
Yellen said the Fed would not stage a bailout of financial institutions similar to the one it did for several of the largest banks in 2008-09, but she said regulators were discussing plans to design policies that would help, without providing further understanding. comes in Description.
His comments have come as some have called for the government to insure all deposits to reduce the risk of contagion to other banks and help affect investor confidence and sentiment.
The FDIC said Friday that customers will have full access to their insured deposits as of Monday morning and it has not yet determined the total amount of insured deposits. Those borrowers will receive an upfront dividend within the next week, the agency said, and uninsured depositors will receive a “certificate of receipt” that allows them to recoup additional payments as the FDIC sells bank assets.
Bill Ackman, the billionaire founder and CEO of hedge fund Pershing Square Capital Management, speaking Saturday on Twitter stated that “by allowing SVB Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is – an unsecured illegal claim on a failed bank.”
SVB Financial Group, a unit of parent company The bank’s sudden collapse in receivership has left hundreds of start-up businesses scrambling to make payroll and wondering whether the money held by the bank will be used to lay off employees. will be forced. Frozen or even lost.
On “Face the Nation,” Yellen said that “the goal—as always—of supervision and regulation is to make sure that contagion can’t happen.”