U.S. Treasury Secretary Janet Yellen said Silicon Valley Bank’s collapse will not warrant a government bailout. File photo by Bonnie Cash/UPI | License Photo
March 12 (UPI) -- U.S. Treasury Secretary Janet Yellen said Silicon Valley Bank's collapse will not warrant a government bailout.
Yellen appeared on Face the Nation on CBS Sunday, where she discussed the role the government should play when a financial institution fails.
Yellen said Silicon Valley Bank's shutdown differs from the string of banks that were bailed out during the 2008 economic crisis because of reforms that have been made since.
"Well 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," she said.
"And the reforms that have been put in place means that we're not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs."
The California Department of Financial Protection closed SVB on Friday, marking the largest bank closing since Washington Mutual in 2008 and the first FDIC-insured bank to close since Almena State Bank in 2020.
Yellen said the Treasury Department is monitoring the situation closely, in part to identify and avert any potential ripple effects to other banking systems.
"Let me just say that we want to make sure that the troubles that exist at one bank don't create contagion to others that are sound," Yellen said.
Because SVB is insured by the Federal Deposit Insurance Corp., insured customers are expected to receive payments of up to $250,000 beginning on Monday. CBS's Margaret Brennan said about 85% of its customers are not insured.
The bank largely served the tech industry. Yellen said how that industry will be impacted will depend on how the closure of the bank is ultimately resolved. She said she expects some type of government action to be taken in a "timely" way, but would not expound on what deal would be made or when.
"I would say that although the tech sector has been suffering from a downturn, and it's had some significant layoffs," the secretary said.
"The problems of this bank, from reporting about its situation, suggest that because we're in a higher interest rate environment, assets that it holds, many of which are Treasury assets, or mortgage-backed securities that are guaranteed by the government lose market value, and the problems of the tech sector aren't at the heart of the problems of this bank."
As for the economy at large, Yellen said she believes it is in good shape.