Silicon Valley Bank (SVB) may be bought, but not bailed out... U.S. Treasury Secretary Janet Yellen said this Sunday in an interview with CBS. She took the opportunity to confirm that the US government wanted to prevent the failure of the US bank from causing contagion to the rest of the banking system.
"We want to make sure that the problems that affect one bank do not create contagion to others that are strong," the US Treasury Secretary said in an interview with CBS. The Deposit Insurance Agency (FDIC), an offshoot of the US government, took control of Silicon Valley Bank on Friday, on the verge of implosion under the effect of massive withdrawals of its customers.
First Republic affected
If the big banks have so far been spared, several medium-sized or regional institutions fell on the stock market on Friday, fled by worried investors. This is particularly the case of the Californian First Republic, which dropped nearly 30% in two sessions, Thursday and Friday, or Signature Bank, amputated by a third of its value since Wednesday evening.
Both institutions have a large proportion of companies in their client portfolio, whose deposits often exceed the maximum amount insured by the FDIC, which is $250,000 per depositor, which could push them to withdraw their funds.
"Wide range of solutions"
Janet Yellen said Sunday that the government is working this weekend with the FDIC to "resolve" the situation of SVB, about 96% of whose deposits are not covered by the FDIC's money-back guarantee. "I'm sure (the FDIC) is looking at a wide range of solutions, which includes an acquisition" by another bank, the Treasury secretary said.
On the other hand, she ruled out a rescue of SVB via an injection of public money. "During the financial crisis (of 2008), investors from large systemic banks," whose fall the authorities believe would pose a risk to the entire financial system, "were rescued" by the US government, she said. "We're not going to do it again."
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