WASHINGTON – Biden administration officials argued Friday that safeguards implemented after the 2008 financial crisis will protect the US economy in the wake of Silicon Valley bank shutterings.
Treasury Secretary Janet Yellen met with banking regulators on Friday to discuss the sudden development and said the federal government is well equipped to handle the situation, according to the Treasury Department.
“Secretary Yellen expressed full confidence in banking regulators to take appropriate action in response and noted that the banking system remains resilient and that regulators have effective tools,” the department said in a readout of the meeting.
Yellen met with top officials from the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.
Earlier in the day, before announcing the collapse of the Silicon Valley bank, Yellen told House lawmakers during a budget hearing that “there have been some developments recently that are related to certain banks that I will be monitoring very carefully.” And when banks experience financial losses, that is and should be a matter of concern.”
During Friday’s White House briefing, one of President Joe Biden’s top economic advisers compared the closure of a Silicon Valley bank with the 2008 financial crisis.
“You know our banking system is in a fundamentally different state than it was a decade ago,” Cecilia Rouse, chair of the White House Council of Economic Advisers, told reporters. “Then the reforms that were put in place really provide the kind of flexibility that we would like to see. That’s why we have full faith in our regulators.”
When further pressed about the potential economic and financial fallout, Rouse said that reforms implemented after 2008 included conducting stress tests for banks and other tools that regulators can use to protect the banking system. Can
The California Department of Financial Protection and Innovation on Friday took over and closed the Silicon Valley bank to protect deposits, naming the FDIC as its receiver. The FDIC has created a separate unit where all of the bank’s insured deposits will be available as of Monday morning.
The closure is the largest bank failure since the 2008 financial crisis and the second largest on record after the collapse of Washington Mutual during that industry-wide downturn, according to FDIC data.
Democratic Representative Ro Khanna, whose district includes Silicon Valley, said Friday that he had reached out to the White House and the Treasury Department to discuss the bank failure.
“I stressed the importance of doing everything legally permissible and appropriate to support the bank at the heart of the startup and tech economy.” said on twitter,
Rape. Eric Swalwell, a fellow California Democrat, Tweeted That he is working with his partners in the state on protecting all depositors at the Silicon Valley bank, which at the end of December was the nation’s 16th largest.
“We must ensure that all deposits over the FDIC $250k limit are honored. Banking is about trust,” he said. “If depositors lose faith in the safety of deposits of more than 250,000, we are in trouble.”
The shutdown came after a tumultuous morning for the bank, during which trading of its shares was halted after falling double digits before the market open. The drop came after a more than 60% drop on Thursday.
Worries over a run at SVB prompted Wall Street investors to dump other bank stocks. Shares of other major West Coast lenders fell sharply on Friday, including First Republic Bank, PacWest Bancorp and Western Alliance Bancorporation.
