Washington (CNN) The Treasury Department told lawmakers on Sunday that the Federal Deposit Insurance Corp. is ready to “operate” the failed Silicon Valley bank so that depositors can maintain pay for their employees, and that more operations will be revealed in the coming days. California representatives told CNN.
The Washington Post US officials are also reportedly considering guaranteeing all uninsured deposits in the bank as the government searches for a potential buyer.
All this comes as Treasury Secretary Janet Yellen said on Sunday that the government would not bail out the bank, an idea many lawmakers have spoken out against.
“During the financial crisis, the investors and the owners of the big banks bailed out, and we certainly don’t see that,” Yellen told CBS News when asked if a bailout would happen. “And the reforms brought in mean we’re not going to do that again.”
Undersecretary for Internal Revenue Nellie Liang and Assistant Secretary for Legislative Affairs Jonathan Davidson told California lawmakers that the FDIC has already taken action and bids to buy SVB are expected to begin Sunday afternoon.
Yellen said she has been hearing from depositors all weekend, many of whom are “small businesses” that employ thousands of people. “I have been working with our banking regulators throughout the weekend to design appropriate policies to address this situation,” the Treasury secretary said, declining to provide further details.
SVP It collapsed on Friday morning After a shocking 48 hours, a bank run and a capital crisis led to the second largest failure of a financial institution in US history.
Confusion fueled by high interest rates led to an old-fashioned bank run on Thursday, in which depositors withdrew $42 billion from SVB.
When the FDIC took control of the bank on Friday, it said it would pay customers’ insured deposits on Monday, up to $250,000. But a lot of money — and influence — is at stake.
SVB has funded nearly half of US venture-backed technology and health care companies. At the end of 2022, the bank said it had $151.5 billion in uninsured deposits, of which $137.6 billion were with U.S. depositors.
While a lot of money may have come in while the bank is running and customers may get some uninsured funds as the government liquidates SVB, it is not yet certain whether they will be able to get their money back.
Relatively unknown outside Silicon Valley, SVB was one of the top 20 U.S. commercial banks with total assets of $209 billion at the end of last year, according to the FDIC. It was the largest lender to fail since the collapse of Washington Mutual in 2008.
Congress reacts
Analysts said the bank’s collapse is unlikely to have the domino effect that hit the banking sector during the 2008 financial crisis, despite initial panic on Wall Street, which sent its stake in SVB plummeting.
Shalanda Young, director of the White House Office of Management and Budget, insisted in a Sunday interview with CNN’s Kaitlan Collins that the US banking system is currently “more resilient.”
“It’s on a better foundation than it was before the financial crisis. That’s largely because of the reforms,” Young said on “State of the Union.”
But there is a decline The bailout has sparked debate in Washington Lawmakers are assessing the fallout.
California lawmakers unanimously agreed on their agreement to help the government find a buyer for the bank and bail it out, two sources familiar with Sunday’s meeting told CNN.
“Our first and foremost concern should be for the affected workers and their paychecks,” Democratic Representative Adam Schiff of California told CNN in a statement.
Representative Nancy Mays, Republican of South Carolina, told Collins in a separate interview on “State of the Union” that she does not support a bailout “at this time” but cautioned that “it’s still early.”
“We cannot continue to bail out private companies because there are no consequences for their actions. People, if they make mistakes or break the law, must be held accountable in this country,” he said.
House Speaker Kevin McCarthy told Fox News on Sunday that he had spoken with Yellen and Federal Reserve Chairman Jerome Powell about the collapse of the SVB and that he believed “they have the tools to handle the current situation.”
“They know the seriousness of this, and they’re trying to make some announcements before the markets open,” the California Republican said.
Another Californian Democrat representing much of Silicon Valley. Ro Khanna said the Treasury Department should be more proactive in ensuring that all depositors in SVB have access to their money.
“The policy should be that all depositors will be protected and have full access to their accounts on Monday morning,” Khanna told CBS News.
Khanna also made it clear that the investors and shareholders of his district-headquartered SVB should not be bailed out.
“I have no sympathy for the administrators, no sympathy for the people who have the balance there. But the depositors are protected,” he said.
Representative Josh Gottheimer, Democrat of New Jersey, a member of the House Financial Services Committee, sent a letter Sunday to Yellen, Powell, FDIC Chairman Martin Grunberg and Office of the Comptroller of the Currency Acting Chairman Michael Hsu. They “must act quickly.”
According to a copy of the letter obtained by CNN, Gottheimer suggested the FDIC prioritize finding a buyer for SVB that “has the resources to provide a seamless transition for the bank’s depositors and borrowers.”
Senate Banking Committee member Kevin Cramer said he believes SVB’s collapse is “so localized that we can solve it that way.”
“The problem is we’re living in a very emotional time where the markets are emotional. To suggest that social media is an accelerator, if you will, of some of that emotion, I think, can be problematic,” the North Dakota Republican said. NBC News. “But hopefully the weekend brought some calm and certainly some strategy.”
This story and headline have been updated with additional reporting.
CNN’s David Goldman, Andrew Millman, Eileen Greif, Alison Morrow, Matt Egan and Jack Forrest contributed to this report.
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