The US ruled out the financial rescue of Silicon Valley but wants to avoid “contagion”

The Secretary of the Treasury USA, Janet Yellenaffirmed this Sunday that the Government wants to avoid the financial “contagion” after the failure of Silicon Valley Bank, but ruled out a rescue of the entity.

“We want to make sure that problems that exist in one bank don’t create contagion to others that are strong,” Yellen said during an interview with CBS. US authorities closed the bank on Friday to protect its clients’ deposits.

Silicon Valley Bank crisis

The banking sector as a whole plunged last Thursday into Wall Streetbut on Friday, shares of some of the largest banks rallied.

However, Regional lenders remained under pressure, including First Republic Bank, which plunged nearly 30% in two sessions on Thursday and Friday, and cryptocurrency-exposed Signature Bank, which has lost a third of its value since Wednesday morning. evening.

Yellen said on Sunday that the government is working with the US guarantee agency, the FDIC, on a “resolution” of the situation at SVB, as Approximately 96% of the deposits of the financial entity do not have a refund guarantee.

“I’m sure they (the FDIC) are considering a wide range of available options including acquisitions,” she said.

Yellen assured that the reforms carried out after the financial crisis of 2008 closed the door to a bailout of the SVB.

“During the financial crisis, investors and owners of big banks were bailed out…and the reforms that have been put in place mean we’re not going to do that again,” he said.

Silicon Valley Bank is the 16th largest bank in the United States. It is the second largest banking collapse in US history after Washington Mutual in 2008. The bank primarily served tech employees and startup investment companies, including some of the best-known tech companies.

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Silicon Valley Bank began to slide into insolvency as its clients, mostly technology companies in need of cash while struggling to obtain financing, began withdrawing their deposits. The bank had to sell bonds at a loss to cover withdrawals, leading to the worst collapse for a US financial institution since the height of the financial crisis.

Yellen pointed to rising interest rates, which the Federal Reserve has been raising to combat inflation, as Silicon Valley Bank’s core problem. Many of its assets, such as bonds and mortgage-backed securities, lost market value as rates rose.