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Monday, March 27, 2023

US Treasury Secretary Rules Out Government Bailout of Silicon Valley Bank

US Treasury Secretary Rules Out Government Bailout of Silicon Valley Bank – Janet Yellen, the U.S. Treasury Secretary, announced on a CBS News interview broadcasted on Sunday that the government has no plans to rescue the collapsed Silicon Valley Bank (SVB), which was closed by regulators on Friday and placed under the Federal Deposit Insurance Corporation’s (FDIC) receivership.

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Yellen was asked whether the U.S. government needs to “intervene and take emergency measures because of SVB failure.” The treasury secretary replied: “America’s economy relies on a safe and sound banking system that can provide for the credit needs of our households and businesses. So whenever a bank, especially one like Silicon Valley Bank with billions of dollars in deposits fails, it’s clearly a concern.”

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She continued: “I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation.” Yellen explained that in the aftermath of the 2008 financial crisis, “unique controls” were put in place to enhance capital and liquidity supervision, and they were tested during the early days of the Covid-19 pandemic. The system “proved its resilience so Americans can have confidence in the safety and soundness of our banking system,” she claimed.

Responding to a question about whether she has “ruled out” a government bailout of Silicon Valley Bank, the treasury secretary detailed: “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking. And the reforms that have been put in place means that we’re not going to do that again.”

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While noting that she cannot provide further details on the SVB situation at this time, Yellen insisted: “The American banking system is really safe and well-capitalized. It’s resilient.” Yellen acknowledged that the government is “well aware that many startup firms have deposits and venture capital firms have deposits at this bank that have been affected by its failure,” emphasizing that “this is something we’re working to try to resolve.”

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After Silicon Valley Bank’s collapse, Bill Ackman, a billionaire, CEO, and portfolio manager of Pershing Square Capital Management, expressed concerns about the extensive and profound effects of the U.S. government’s failure to safeguard all depositors. He also warned that bank runs may begin on Monday. Additionally, Robert Kiyosaki, the author of Rich Dad Poor Dad, has advised that another bank is on the brink of collapse.

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