The United States Treasury Secretary, Janet Yellen,
ruled out this Sunday
that the Joe Biden government launches a rescue for the bankrupt Silicon Valley Bank (SVB) and tried to distance itself from the situation of the 2008 financial crisis. However, Concerned about a possible contagion effect, the authorities are working against the clock and evaluating supporting all customer deposits, an exceptional decision designed to calm things down.
Yellen gave an interview on a CBS
television show
in an attempt to bring peace of mind after the announcement Friday of the bankruptcy of SVB, a California-based bank
whose main clients are small and large technology companies
.
The official sought to bring peace of mind one day before the opening of the markets on Monday, which could suffer a strong impact due to fears of a contagion effect.
Yellen assured that the government will not resort to a bank bailout, but acknowledged that there are concerns for SVB's depositors, many of them start-ups, and said that the authorities "are
focused on trying to respond to their needs
."
"We've been hearing from those depositors and other concerned people this weekend. So let me just say that I've been working all weekend with our banking regulators to devise appropriate policies to address this situation," Yellen said.
Silicon Valley Bank UK (SVB) in London.
AFP photo
The fears
At the start of the 2008 crisis, then-President George W. Bush
did not want to bail out Lehman Brothers
(a bank much larger than the SVB), whose fall caused a cascading effect on the financial system.
The SVB announced last Wednesday that it was going to seek a capital increase to try to deal with its financial difficulties, which had led it to dump investments worth some $21 billion, with a loss of about $1.8 billion
.
That announcement led many clients to withdraw their funds
, after which regulators had to close the bank on Friday for lack of liquidity, and the company's stock price subsequently plunged, which in turn affected the banking sector in general. both in the United States and in other countries.
The Federal Deposit Insurance Corporation (FDIC) announced that SVB will reopen on Monday and that customers with guaranteed deposits -- up to
$250,000, according to US regulation
-- will have access to their money, but most exceed that figure, according to specialized media.
Fearing a contagion effect on US regional banks, the official stated in the program that the country's banking system is
"safe and well capitalized"
, and attributed the collapse of SVB to the policy of interest rate rises for part of the Federal Reserve to control inflation.
The Silicon Valley Bank in Santa Clara, California.
Photo Reuters
In that sense, he added that the regulator is considering the "available options" to rectify the situation,
including the purchase of SVB by another entity.
keep calm
Although Yellen tried putting cold cloths on, the concern is there.
In fact, as
The Washington Post
reported, federal authorities are seriously considering safeguarding all of the SVB's uninsured deposits, which would be an extraordinary intervention to prevent what they fear would be a panic in the US financial system.
Officials at the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation discussed the idea this weekend, sources told the Post, just hours after financial markets in Asia were set to open.
White House officials have also studied the idea.
The Bloomberg agency also reported that the International Monetary Fund is “closely monitoring” the situation and the potential risks of the fall of the SVB.
A spokesman said the agency has "full confidence that the US authorities are taking appropriate measures to deal with the situation."
The United States is the main shareholder of the Fund, which monitors the progress of the economy in its 190 member countries.
The easiest solution would be to sell the bank
, which is why there was an auction this Sunday.
Selling SVB to a healthy institution remains the preferred solution, officials told members of Congress.
Most bank failures are resolved that way and allow depositors to avoid losing money.
Although the Corporation insures bank deposits of up to $250,000, a provision in federal banking law
may also give them the authority to protect uninsured deposits
if they conclude that failure to do so would pose a systemic risk to the broader financial system, the people said.
In that case, uninsured deposits could be backed by an insurance fund, paid regularly by US banks.
Before that happens, the systemic risk verdict must be upheld by a two-thirds vote of the Fed's Board of Governors and the Corporation's board, along with Treasury Secretary Yellen.
No final decision has been made, but the deliberations reflect
concerns about collateral damage
from SVB's collapse and the authorities' struggle to respond amid limits on their powers put in place after the 2008 bailouts.
Alberto Bernal, chief strategist at XP Investments, told
Clarín
that “there is only one way to deal with this, and it is a promise of total support.
There is very little time to do it, so the authorities will be forced to issue a deposit guarantee for everyone in the SVB.”
“Beyond what the authorities do, there may be a run on smaller banks.
Those banks will also need help and the authorities will have no choice but to deal with that as well.”
Experts believe that the situation is not comparable for now with the collapse of 2008.
"I think it will be difficult to say that this is systemic in any way
," said Sheila Bair, a former director of the Corporation, on NBC Anil on Sunday. Kashyap, a professor at the University of Chicago Booth School of Business, said this crisis does not mean the financial system in general is in jeopardy as it was during the 2008 crisis.
"This is not a systemic event. This is a midsize bank that was mismanaged," he said.
But that's different than if someone at the core of the financial system stops making payments to someone else at the core of the system and then the core implodes."
The US banking system is highly concentrated, with the top five institutions holding nearly $13 trillion in assets.
Even if other banks that are comparable in size to SVB suffered runs on depositors, the overall financial system would continue to function, he said.
look also
Silicon Valley Bank collapse sparks chaos among tech startups
The CEO of the failed California bank sold millions of dollars in shares before the collapse
