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Treasury Secretary Janet Yellen said Sunday the government wants to avoid financial “contagion” from Silicon Valley Bank’s implosion, but while the US rules out a bailout it reportedly is considering safeguarding all of the fallen institution’s deposits.
Regulators on Friday took control of SVB — a key lender to startups across the United States since the 1980s — after a huge run on deposits left the medium-sized bank unable to stay afloat on its own.
With the bank’s future, and its billions in deposits, up in the air, officials of the Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) were meeting in an urgent effort to craft a solution just hours before financial markets open in Asia, the Washington Post reported.
In the scramble to avert a potential financial panic, the officials were considering the extraordinary step of safeguarding all uninsured deposits at SVB, the Post reported.
That plan would likely kick in only if a quickly organized government auction aimed at finding a healthy buyer for the bank failed by Sunday afternoon, the Post said, citing three people with knowledge of the matter.
Earlier Sunday, Yellen told CBS that the US government wanted “to make sure that the troubles that exist at one bank don’t create contagion to others that are sound.”
She added that the government was working with the FDIC on a “resolution” of the situation at SVB, where some 96 percent of deposits are not covered by the FDIC’s reimbursement guarantee.
Investors punished the banking sector in total on Thursday after SVB disclosed the extent of its troubles the day before, but by Friday, shares in some larger banks posted gains.
Despite attempts by US officials to assure the financial markets, regional lenders remained under pressure.
They included the First Republic…
