The United States Treasury Secretary, Janet Yellen, assured this Sunday that the government is not considering granting a bailout to the owners and investors of Silicon Valley Bank (SVB) after its historic fall last Friday. Yellen maintained that “the situation that occurred in 2008 when the administration provided hundreds of millions of dollars to prevent the breakdown of the financial system” will not be repeated.
“I want to make it very clear. During the financial crisis there were owners and investors of big banks that were bailed out, but the reforms implemented since then mean that it cannot be repeated, ”he stressed on CBS.
The collapse of the SVB, upon discovering that it was missing 2,250 million to balance its balance, caused an earthquake in the technology industry, which relied crucially on that entity for its business. Federal regulators took over the bank as savers scrambled to get the money out of their accounts. It is considered that they withdrew 42,000 million. This raised fears that the damage would spread to the banking system in general.
The big test will be this Monday. It is the day set by the Federal Deposit Insurance Corporation (FDIC) in which this body is supposed to start paying the coverage of $250,000 for each account holder. However, many of the holders did not have an insurance policy, raising fears that there is no way to get their money back.
Yellen argued that Americans need to trust the banking infrastructure. “Americans should feel confident in banking infrastructure that is safe and sound,” she remarked.
“I have been working all weekend with the banking regulators to design the appropriate policies in the face of this situation,” he insisted. “We want to make sure that the problems that exist in one bank do not create contagion in others,” she reiterated. Yallen remarked that the sector was being controlled to prevent the domino effect from occurring.
The US government faced deep criticism for bailing out banks in 2008, after the collapse of Lehman Brothers. Many believed that the administration rewarded wealthy executives and stockholders for their irresponsible behavior and investment practices that helped sink the economy in that period.
