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While many are concerned about what the aftermath of the collapse of Silicon Valley Bank will be in the next couple of weeks and months, Treasury Sec Janet Yellen seems unfazed.
United States Treasury Secretary Janet Yellen has confirmed that the government will not come to the aid of the beleaguered financial institution, Silicon Valley Bank (SVB). Treasury Sec revealed this in an interview on Sunday noting that the Treasury’s focus is on ensuring that the bank’s depositors are adequately protected.
Yellen is notably concerned about the impact of the collapse of Silicon Valley Bank which she tagged as the worst bank failure since the 2008 financial crisis. SVB is known as the livewire for most emerging and established tech firms in Silicon Valley and the broader US. The bank is a lender to more than 50% of the tech firms that recently went public in the United States.
Considering its size and its positioning, there were expectations that the government will at least come to its aid in the form of a bailout. Yellen’s comment is now considered a peg on the impossibility.
“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. 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,” Yellen told CBS in the interview.
SVB’s financial crisis takes deep roots in the failed bond investment the company holds. As reported earlier by Coinspeaker, it made attempt to raise over $1.5 billion in share sales to cushion the aftermath of some of the impact of the failed deals.
Investors perceived weakness from this and from the FUD that ensued, many started withdrawing their funds, leading to the bank run that finally crushed the firm.
Treasury Sec Compares SVB Collapse to 2008 Financial Crisis
While many are concerned about what the aftermath of the collapse of Silicon Valley Bank will be in the next couple of weeks and months, Treasury Sec Janet Yellen seems unfazed. According to her, the US financial ecosystem has evolved since the 2008 financial crisis and a lot of policies are now in place to prevent the contagion of the collapse of one bank to that of others.
Yellen said the American banking industry is well capitalized to cushion any form of strain across the board. The Federal Deposit Insurance Commission (FDIC) opened a late auction on SVB assets on Saturday with the final bids sent in on Sunday.
As the regulators are doing all they can to save depositors, many industry leaders are unpleased with the approach of the government in what was described by Garry Tan, the President of the startup accelerator Y Combinator said is detrimental to the American innovation landscape.
The SVB collapse will affect more than 1,000 startups that Y Combinator has backed thus far.