Washington (CNN) The Treasury Department told lawmakers Sunday that the Federal Deposit Insurance Corporation is ready to “operate” the failed Silicon Valley bank to ensure depositors can keep their employees’ payroll and that more operations will emerge in the coming days, a source familiar with a briefing to the California delegation told CNN. .
Washington Post US officials also reported studying underwriting all uninsured deposits at the bank as the government looked for a potential buyer.
It all comes as Treasury Secretary Janet Yellen said Sunday that the government will not bail out the bank, with a number of lawmakers speaking out against the idea.
“Let me make it clear that during the financial crisis, there were investors and owners of large, systemic banks who were bailed out, and we’re certainly not looking,” Yellen told CBS News when asked if there would be a bailout. “And the reforms that have been put in place mean we will never do that again.”
Local Undersecretary of Finance Nellie Liang and Assistant Secretary for Legislative Affairs Jonathan Davidson also told California lawmakers that the FDIC already has open proceedings, and offers to acquire SVB are expected to begin Sunday afternoon.
Yellen said she’s been hearing from the depositors all weekend, many of whom are “small businesses” and employ thousands of people. “I worked all weekend with our banking regulators to put in place appropriate policies to address this situation,” the Treasury secretary said, declining to give further details.
SVB It broke down on Friday morning After a staggering 48 hours in which bank inflows and a capital crisis led to the second largest financial institution failure in US history.
The chaos unleashed by rising interest rates sent old banks into a tailspin on Thursday, as depositors grabbed $42 billion from the SVB.
When the FDIC took control of the bank on Friday, it said it would pay customers their insured deposits on Monday, which only covered up to $250,000. But there’s a lot of money – and influence – at stake.
SVB has provided financing to nearly half of the technology and healthcare companies backed by US ventures. At the end of 2022, the bank said it had $151.5 billion in uninsured deposits, of which $137.6 billion was held by American depositors.
Although a lot of money may have gone out while the bank was running and customers could get some uninsured money while the government liquidated the SVB, they are still not sure if they can get all their money back.
While relatively unknown outside of Silicon Valley, SVB was among the 20 largest US commercial banks, with total assets of $209 billion at the end of last year, according to the Federal Insurance Corporation (FDIC). It is the biggest bank to fail since the collapse of Washington Mutual in 2008.
Despite the initial panic on Wall Street over the run on SVB, which caused its shares to crash, analysts said the bank’s collapse was unlikely to lead to the kind of domino effect that gripped the banking industry during the 2008 financial crisis.
Shalanda Young, director of the White House Office of Management and Budget, stressed in an interview Sunday with CNN’s Caitlan Collins that the US banking system in general is now “more resilient.”
“Its foundation is better than it was before the financial crisis,” Young said of the State of the Union. “This is largely due to the reforms that have been put in place.”
But the collapse happened Prompted the bailout debate in Washington As lawmakers assess the implications.
California lawmakers are unanimous in their agreement that the government should help find a buyer for the bank rather than bail it out, two sources familiar with the briefing Sunday told CNN.
“Our first and foremost concern should be with the affected workers and their paychecks,” Democratic Rep. Adam Schiff of California told CNN in a statement.
Republican Representative Nancy Mays of South Carolina told Collins in a separate “State of the Union” interview that she did not support the bailout “at this time” but cautioned, “It’s still very early days.”
“We cannot continue to bail out private companies, because there are no consequences for their actions. People, when they make mistakes or break the law, have to be held accountable in this country,” she said.
House Speaker Kevin McCarthy told Fox News Sunday that he has spoken with Yellen and Federal Reserve Chairman Jerome Powell about the SVB collapse and believes they have the tools to handle the current situation.
“They know the seriousness of this, and they’re working to try to put forward an announcement before the markets open,” said the California Republican.
Another California Democrat, Ro Khanna, who represents much of Silicon Valley, said the Treasury Department needs to get tougher on making sure all SVB depositors get their money back.
“The principle 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 investors and shareholders of SVB, which is headquartered in his region, should not be bailed out.
“I don’t sympathize with CEOs, I don’t sympathize with people who have stocks there. But depositors are protected,” he said.
Democratic Rep. Josh Gottheimer of New Jersey, who sits on the House Financial Services Committee, sent a letter on Sunday to Yellen, Powell, FDIC Chairman Martin Gruenberg and Michael Hsu, acting head of the Office of the Comptroller of the Currency, urging them to “act quickly.”
Gottheimer recommended that the FDIC prioritize finding a buyer for SVB who “has the resources to provide a smooth transition for the bank’s depositors and borrowers,” according to a copy of the letter obtained by CNN.
Senate Banking Committee member Kevin Kramer said he hoped the SVB collapse was “very local and we can handle it that way.”
“The problem is we live in a very emotional time, where markets are emotional. Referring to social media as accelerating, if you will, could be problematic,” said the North Dakota Republican. NBC News. “But I hope the weekend brings some calm and certainly some strategy as well.”
This story and headline have been updated with additional reporting.
David Goldman, Andrew Millman, Aileen Grieve, Alison Morrow, Matt Egan and Jack Forrest contributed to this report.
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