Treasury secretary Janet Yellen said on Sunday that the U.S. government would not bail out Silicon Valley Bank but is concerned about depositors reeling from what is the worst bank failure since the 2008 financial crisis and will try to help them.
The sudden collapse of Silicon Valley Bank, the lifeblood of young tech firms, has sent shock waves through the startup ecosystem as countless firms scramble to find ways to meet next week’s payroll and other operating expenses after the bank was taken over by the regulators on Friday.
“Well let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking. And the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs,” Yellen told CBS in an interview on Sunday.
Yellen provided few details on the government’s next steps, but asserted that the fallout of Silicon Valley Bank was a different situation from the financial crisis in 2008.
“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,” she told the broadcaster.
Garry Tan, the president of kingmaker startup accelerator Y Combinator, whose over 1,000 portfolio startups are impacted by the SVB collapse, called on Congress on Saturday to act more decisively to save the lender.
“We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy. We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank. According to the NVCA, Silicon Valley Bank has over 37,000 small businesses with more than $250,000 in deposits,” wrote Y Combinator in an open petition signed by over 3,500 chief executives.
The Silicon Valley Bank crisis also has implications for firms over 8,000 miles away. Over 60 YC-backed Indian startups have more than $250,000 stuck in accounts with Silicon Valley Bank and nearly two dozen have more than $1 million tied with the lender, TechCrunch reported earlier.
“Americans need to feel confident that the banking system is safe and sound that it can meet the credit needs of households and businesses, and that depositors don’t have to worry about losing access to their money,” Yellen added.