Washington (CNN) The Treasury Department told lawmakers on Sunday that the Federal Deposit Insurance Corporation is prepared to “operate” the failed Silicon Valley Bank to ensure depositors can maintain wages for its employees and that more operations will emerge in the coming days, a source familiar with a briefing with It says California’s delegation to CNN.
The Washington Post also reported that US officials are considering guaranteeing all uninsured deposits at the bank as the government looks for a potential buyer.
All this comes as Treasury Secretary Janet Yellen said on Sunday that the government would not bail out the bank, with a number of lawmakers speaking out against such an idea.
“Let me be clear that during the financial crisis it was investors and owners of systemic big banks that got bailed out, and we’re certainly not looking,” Yellen told CBS News when asked if there will be a bailout. “And the reforms that have been put in place mean that we won’t do it again.”
Treasury Undersecretary Nellie Liang and Assistant Secretary for Legislative Affairs Jonathan Davidson also told California lawmakers that the FDIC has already opened action, with bids to buy SVB expected to begin Sunday afternoon.
Yellen said she has been hearing from depositors all weekend, many of whom are “small businesses” employing thousands of people. “I have been working all weekend with our banking regulators to devise appropriate policies to deal with this situation,” the finance minister said, declining to provide further details.
SVB collapsed on Friday morning after a stunning 48 hours in which a bank run and capital crisis led to the second largest failure of a financial institution in US history.
The chaos triggered by high interest rates led to the old-fashioned bank run on Thursday, where depositors withdrew 42 billion dollars from SVB.
When the FDIC took control of the bank on Friday, it said it would pay customers their insured deposits on Monday, which only cover up to $250,000. But there is a lot of money – and influence – at stake.
SVB provided financing for almost half of US venture-backed technology and healthcare companies. By the end of 2022, the bank said it had $151.5 billion in uninsured deposits, of which $137.6 billion was held by U.S. depositors.
While a lot of money may have come out during the bank run and customers may get some uninsured funds as the government liquidates SVB, they are still unsure if they can get all their cash back.
Although relatively unknown outside Silicon Valley, SVB was among the top 20 U.S. commercial banks, with $209 billion in total assets at the end of last year, according to the FDIC. It is the largest lender to fail since Washington Mutual collapsed in 2008.
Despite initial panic on Wall Street over the run-up to SVB, which sent shares cratering, analysts said the bank’s collapse is unlikely to trigger the kind of domino effect that gripped the banking industry during the 2008 financial crisis.
Shalanda Young, the director of the White House Office of Management and Budget, emphasized in a Sunday interview with CNN’s Kaitlan Collins that the overall US banking system was “more resilient” now.
“It’s on a better footing than it was before the financial crisis. That’s largely because of the reforms that have been put in place,” Young said on “State of the Union.”
But the collapse has sparked a bailout debate in Washington as lawmakers weigh the fallout.
California lawmakers were unanimous in their agreement that the government should help find a buyer for the bank rather than bail it out, two sources familiar with Sunday’s briefing told CNN.
“Our primary concern must be with the workers affected and their paychecks,” Democratic Rep. Adam Schiff of California told CNN in a statement.
Republican Rep. Nancy Mace of South Carolina told Collins in a separate interview on “State of the Union” that she does not support a bailout “at this point,” but cautioned, “It’s still very early.”
“We cannot continue to bail out private companies, because there are no consequences for their actions. People, when they make mistakes or break the law, must be held accountable in this country,” she said.
House Speaker Kevin McCarthy told Fox News on Sunday that he has spoken with Yellen and Federal Reserve Chair Jerome Powell about the collapse of SVB and believes “they have the tools to deal with the current situation.”
“They know the seriousness of this and they are working to try to make some announcements before the markets open,” the California Republican said.
Another Californian, Democratic Representative Ro Khanna, who represents much of Silicon Valley, said the Treasury Department needs to be more aggressive in ensuring that all depositors in SVB will have access to their money.
“The principle has to be that all depositors will be protected and have full access to their accounts on Monday morning,” Khanna told CBS News.
Khanna also made it clear that investors and shareholders in SVB, which is headquartered in his district, should not be bailed out.
“I have no sympathy for the managers, no sympathy for the people who have shares there. But the depositors are protected,” he said.
Democratic Representative Josh Gottheimer of New Jersey, a member of the House Financial Services Committee, sent a letter Sunday to Yellen, Powell, FDIC Chairman Martin Gruenberg and Michael Hsu, the acting head of the Office of the Comptroller of the Currency, asking them to “act quickly”.
Gottheimer recommended the FDIC prioritize finding a buyer for SVB “that has the resources to provide a seamless transition for the bank’s depositors and borrowers,” according to a copy of the letter obtained by CNN.
Senate Banking Committee member Kevin Cramer said he hopes the collapse of SVB is “very localized and we can handle it that way.”
“The problem is that we live in a very emotional time, where markets are emotional. The reference to social media as an accelerator, if you will, for some of that emotion, I think could be problematic,” the North Dakota Republican said. NBC News. “But I hope with the weekend came some calm and certainly some strategy as well.”
This story and headline have been updated with additional reporting.
CNN’s David Goldman, Andrew Millman, Aileen Graef, Allison Morrow, Matt Egan and Jack Forrest contributed to this report.