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Tuesday, March 21, 2023

US Excludes Hospitality Silicon Valley Bank

WILMINGTON, Del. ( Associated Press) — U.S. Treasury Secretary Janet Yellen said Sunday the federal government will not bail out Silicon Valley banks, but will help depositors aware of the money.

The Federal Deposit Insurance Corporation (FDIC) guarantees up to $250,000 per account, but many wealthy businesses—and people who serve in tech-savvy banks and private equity—have much more than that. There are fears that the casino operator will not accept it.

Yellen, in an interview with the program “Fare of the Nation” CBS, did not provide many details about the next steps of the government in this matter. But he stressed that the situation is very different from the financial crisis 15 years ago, when the government had to inject a lot of white money to save money.

“We’re not going to do it again,” Yellen said, “but we care about depositors and we’re trying to meet their needs.”

Despite the jitters on Wall Street, Yellen tried to calm the public by saying that the collapse of Silicon Valley Bank had no effect.

“The US banking system is really safe and capitalized, that’s soft,” the official emphasized.

Silicon Valley Bank, headquartered in Santa Clara, California, is the 16th largest bank in the United States. It is the second largest bank failure in US history after Washington Mortgage in 2008. The bank primarily served tech operators and startup investment companies, including some well-known tech companies.

Silicon Valley Bank began to slide into insolvency as its customers, mostly technology companies in need of cash while struggling to secure financing, began withdrawing deposits. Banks had to sell debt securities to cover foreclosures, leading to the worst collapse for US financial institutions since the height of the financial crisis.

Yellen pointed to rising interest rates, which the Federal Reserve has raised to fight inflation, as a core problem for Silicon Valley Bank. Many of their assets, such as bonds and mortgage-backed securities, lost market value as rates rose.

“Problems with the technological sector are not the center of this bank’s problems,” he proposed.

Yellen said she expected regulators to consider “a wide variety of available options,” including another institutional acquisition of Silicon Valley Bank. So far, however, no potential buyers have raised their hands.

Sheila Bair, who chaired the FDIC during the financial crisis, recalled that with almost every bank failure at that time, “we sold a failed bank to a healthy bank. And the buyer typically also covered the unsecured amounts because they wanted freedom of the value of those large depositors, so that was the best case scenario. But with Silicon Valley Bank’s situation, NBC said “Meet the Press” that this “was a liquid crash, the bank was running, so there was no time to prepare for the sale of the bank. Now they have to do this and try to catch up.”

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Associated Press writers from Hope Friday in Washington contributed to this report.

World Nation News Desk
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