The United States Treasury Secretary, Janet Yellen stated on Sunday that the United States government had no plans to bail out SVB but was “working closely with banking regulators” to help the bank.
Speaking on a Sunday show that aired on US TV station CBS, Yellen the Treasury secretary attempted to assure customers of the bank that regulators were working out a solution for everyone affected by the collapsed bank.
However, she stopped short of promising any bailout of the bank.
Not again: Emphasising that the government has no plans to bail out any company again, Yellen said:
- “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 mean that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.”
- “Look, I’m not going to comment on the details of the situation at this point. I simply want to say that we’re very aware of the problems that depositors will have, many of them are small businesses that employ people across the country. And of course, this is a significant concern, and working with regulators to try to address these concerns,” she told the interviewer.
Calls for protection of depositors: Yellen’s comments are coming amid calls for the protection of startups who are depositors in the bank and whose businesses may hit the rock as a result of SVB’s collapse.
Janet Yellen’s comments will likely perturb uninsured depositors of the bank who have money more than $250k with the failed bank. Without a bailout, uninsured depositors will have to hope that a sale of the bank to another stronger financial institution might help secure their deposits.
Startup Accelerator, Y Combinator in a petition to the Treasury Secretary and the U.S. Congress is asking for the protection of thousands of its startups whose funds are trapped in the bank.
- “We, the undersigned, are deeply concerned about the rapid failure of Silicon Valley Bank, a leading financial institution that has played a vital role in supporting the technology industry in the United States. We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy.
- “We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank. According to the NVCA, Silicon Valley Bank has over 37,000 small businesses with more than $250,000 in deposits. These balances are now unavailable to them, and without further intervention, according to the FDIC website, may be inaccessible for months to years,” Y Combinator said in the petition signed by thousands of tech founders.
It further noted that one-third of startups in the Y Combinator community with exposure to SVB used SVB as their sole bank account. As a result, they will fail to have the cash to run payroll in the next 30 days. By that measure, it is estimated that payroll-related furlough or shutdown will impact more than 10,000 small businesses and startups, which may lead to the loss of jobs for over 100,000 people employed by the startups.