Treasury Chief Rejects Government Rescue of Silicon Valley Bank

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U.S. Treasury Secretary Janet Yellen has shot down the possibility of a government bailout of the now-defunct Silicon Valley Bank (SVB), which was closed by regulators on Friday. Yellen pointed out that the measures taken after the 2008 financial crisis are intended to prevent bailouts from being necessary.

Yellen Refuses to Bail Out Failed SVB

U.S. Treasury Secretary Janet Yellen spoke out in an interview on CBS News, which aired Sunday, and declared that the government is not looking into a bailout for the now-defunct Silicon Valley Bank (SVB). The bank was shut down by regulators on Friday and placed in receivership by the Federal Deposit Insurance Corporation (FDIC).

Yellen was asked if the U.S. government needs to “intervene and take emergency measures due to the SVB failure” and responded: “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.” She went on to say:

I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation.

Yellen elaborated that the reforms implemented after the 2008 financial crisis “were designed to enhance capital and liquidity supervision, and they were tested during the early days of the Covid-19 pandemic.” The system, she added, “proved its resilience so Americans can have confidence in the safety and soundness of our banking system.”

The treasury secretary was questioned whether she has “ruled out” a government bailout of Silicon Valley Bank and explained:

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.

While Yellen refrained from giving more details on the SVB situation at this time, she did stress that “the American banking system is really safe and well-capitalized. It’s resilient.”

The collapse of Silicon Valley Bank has sparked warnings from billionaire Bill Ackman, CEO and portfolio manager of Pershing Square Capital Management, who spoke of “vast and profound” consequences of the U.S. government allowing the bank to fail without protecting all depositors. He also predicted possible bank runs to start on Monday. Robert Kiyosaki, author of Rich Dad Poor Dad, has also cautioned that another bank is set to crash.

What are your thoughts on U.S. Treasury Secretary Janet Yellen’s statements? Should the government bail out SVB? Share your opinion in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin discovered Bitcoin in 2011 and has been an advocate ever since. His interests include Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

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