No Federal Bailout for SVB, But FDIC Auction Is Underway

In the wake of Silicon Valley Bank’s collapse, Treasury Secretary Janet Yellen said Sunday that the federal government would not bail out the bank, but is working to help depositors; she added that regulators are looking into “a wide range of available options,” including acquisitions.

The first bank failure since 2020 transpired at a whirlwind pace—collapsing in just 48 hours—starting on Wednesday when the bank asked investors for $2.25 billion. As the Washington Post put it, “SVB was heavily dependent upon a single risky sector of the economy for both its depositors and its customers,” as the bank was known for its relationship with the tech industry. 

On “Face the Nation” on Sunday, the treasury secretary said, “We are concerned about depositors, and we’re focused on trying to meet their needs.” While U.S. customers with less than $250,000 in the bank will be covered by the Federal Deposit Insurance Corp. [FDIC] (and should be available Monday morning), clients with higher sums in the bank, like tech startups and VC firms, are scrambling.

When host Margaret Brennan asked if Yellen would consider a foreign bank swooping in to help the situation, Yellen said the decision is up to the FDIC, “and I’m sure they’re considering a wide range of available options. That would include acquisitions.” Bloomberg reported that the auction process for SVB commenced on Saturday night, with final bids due by Sunday afternoon.

Yellen also underscored that this situation is much different from the 2008 financial crisis, as fears of “contagion” proliferate and Canada and the UK work to limit any repercussions from the fallout. “What I do want to do is emphasize that the American banking system is really safe and well-capitalized, it’s resilient. In the aftermath of the 2008 financial crisis, new controls were put in place, better capital and liquidity supervision, and was tested during the early days of the pandemic, and proved its resilience so Americans can have confidence in the safety and soundness of our banking system.”

California Governor Gavin Newsom wrote in a statement on Saturday: “Over the last 48 hours, I have been in touch with the highest levels of leadership at the White House and Treasury. Everyone is working with FDIC to stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.”

House Speaker Kevin McCarthy said on Fox’s “Sunday Morning Futures” that the Biden administration has “ the tools to handle the current situation, they do know the seriousness of this, and they are working to try to come forward with some announcement before the markets open.” He also said that he hoped SVB would be purchased: “I think that would be the best outcome to move forward and cool the markets and let people understand that we can move forward in the right manner.”

So far, the repercussions of the collapse have expanded overseas. On Friday, the Bank of England said that it would not bail out the UK arm. On Saturday, over 100 tech company heads sent a letter calling on UK Chancellor Jeremy Hunt to intervene, writing that SVB’s insolvency “represents an existential threat to the UK tech sector.”