Yellen: No, We Won't Bail Out Silicon Valley Bank

'Whole generation' of tech startups face potential collapse
By John Johnson,  Newser Staff
Posted Mar 12, 2023 10:45 AM CDT
Yellen: No, We Won't Bail Out Silicon Valley Bank
People look at signs posted outside of an entrance to Silicon Valley Bank in Santa Clara, Calif., Friday, March 10, 2023.   (AP Photo/Jeff Chiu)

The fallout from the Friday failure of Silicon Valley Bank—the 16th-largest bank in the nation—continues to spread far and wide in the financial world. A look at coverage:

  • Uninsured: The FDIC insures deposits up to $250,000, but many tech startups and other businesses had far more than that in the bank. Whether they get their money back will depend on how much the regulator gets as it sells off assets or another bank swoops in to assume ownership, reports CNBC. In the meantime, some companies might have trouble making payroll. And problems could get far worse after that.

  • Startup trouble: NPR reports that the bank's failure raises the possibility of mass layoffs and hundreds of company failures among tech startups. "If the government doesn't step in, I think a whole generation of startups will be wiped off the planet," says Garry Tan, president and CEO of the startup incubator Y Combinator.
  • Echoing that: Mark Cuban voices a similar sentiment: "The tragedy of SVB is that it's not the wealthy taking the hit," he tweeted. "It's the thousands of companies who borrowed from SVB and were required to keep their cash in SVB. Those entrepreneurs and their employees and vendors are feeling the pain. And they are who the Fed should protect."
  • No bailout: But how might the government step in? Treasury Chief Janet Yellen said Sunday that a bailout is off the table. "We're not going to do that again," she said on CBS' Face the Nation, referring to the bank bailouts of the financial crisis in 2008. "But we are concerned about depositors, and we're focused on trying to meet their needs." She said the US banking system is "safe and sound" and on much firmer ground than it was 15 years ago.
  • What then? Pressed on whether depositors will get their money back, Yellen responded: "Look, I'm not going to comment on the details of the situation at this point. I simply want to say that we're very aware of the problems that depositors will have, many of them are small businesses that employ people across the country. And of course, this is a significant concern, and working with regulators to try to address these concerns."
  • A fear: Axios says the nation's smaller banks are worried, for good reason. The type of old-fashioned bank run by worried customers that doomed SVB could spread: "If SVB's depositors aren't made whole by Monday morning, hundreds of billions of dollars of corporate deposits are likely to flow out of regional banks."
(More bank failure stories.)

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