Yellen says regulators should contain fallout from Silicon Valley bank collapse

Treasury Secretary Janet L. Yellen said Sunday regulators were working all weekend to deal with the aftermath of the Silicon Valley bank collapse, but were trying to reassure the public that America’s banking system was “safe and well capitalized.”

The Federal Deposit Insurance Corporation announced on Friday that it would acquire Silicon Valley Bank and place nearly $175 billion in customer deposits under the regulator’s control. The bank’s failure, the second largest in US history, has raised concerns that other financial firms could suffer the same fate as rising interest rates put pressure on the banking sector.

Ms Yellen, speaking on CBS’s Face the Nation, declined to say what steps regulators might take to protect depositors, including many whose funds are now frozen at the bank. However, she said she is aware that many small businesses are counting on funds from Silicon Valley Bank and that regulators are working to address those concerns.

The Treasury Secretary indicated that a takeover of Silicon Valley Bank is one of several possible outcomes and that regulators are trying to address the situation “in a timely manner”.

She said she doesn’t believe the problems the tech sector has been grappling with in recent months, such as layoffs, are “at the heart” of the problems at Silicon Valley Bank.

In a bid to calm a nervous public, Ms Yellen described the banking system as “resilient” after the 2008 financial crisis and the early days of the pandemic.

“We are very aware of the issues facing depositors, many of whom are small businesses employing staff across the country and of course this is a significant issue and we are working with regulators to try to address these concerns,” called Mrs. Yellen.

The Treasury Secretary said the next steps would ultimately lie with the Federal Deposit Insurance Corporation, which acquired the bank on Friday. The FDIC said the bank will be operational by Monday and checks written by the old bank will continue to be cashed. While customers with deposits of up to $250,000 — the maximum amount covered by FDIC insurance — will be recovered, there is no guarantee that depositors with larger amounts in their accounts will get all of their money back.

In the interview, Ms Yellen emphasized the strength of the US economy and sought to allay concerns about the banking system that could make Americans fear their money is not safe.

“Americans need confidence that the banking system is safe and sound, that it can meet the borrowing needs of homes and businesses, and that depositors don’t have to worry about losing access to their money,” Ms. Yellen said. “These are goals that we all make our own.”