US government rules out Silicon Valley Bank bailout, wants to avoid 'contagion': Yellen
Sign up now: Get ST's newsletters delivered to your inbox
US Treasury Secretary Janet Yellen said the government wanted to avoid financial “contagion” from the implosion of the Silicon Valley Bank but ruled out a bailout of the institution.
PHOTO: REUTERS
Follow topic:
WASHINGTON - US Treasury Secretary Janet Yellen on Sunday said the government wanted to avoid financial “contagion” from the implosion of the Silicon Valley Bank
“We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” Dr Yellen said during an interview with CBS.
On Friday, US regulators pulled the plug on SVB – a key lender to US start-ups since the 1980s – after a run on deposits made it no longer tenable for the medium-sized bank to stay afloat on its own.
Following SVB’s disclosure on Wednesday, investors punished the banking sector as a whole on Thursday, but by Friday, shares in some larger banks had posted gains.
However, regional lenders remained under pressure, including First Republic Bank, which slumped nearly 30 per cent in two sessions on Thursday and Friday, and Signature Bank, a cryptocurrency-exposed lender, which has lost a third of its value since Wednesday evening.
Dr Yellen said on Sunday that the government was working with the US deposit guarantee agency, the Federal Deposit Insurance Corporation (FDIC), on a “resolution” of the situation at SVB, where about 96 per cent of deposits are not covered by the FDIC’s reimbursement guarantee.
“I’m sure they (the FDIC) are considering a wide range of available options that include acquisitions,” she said.
Dr Yellen said reforms made after the 2008 financial crisis meant the government was not considering a bailout for SVB.
“During the financial crisis, there were investors and owners of systemic large banks that were bailed out... and the reforms that have been put in place means that we’re not going to do that again,” she said. AFP
