Treasury Secretary Janet Yellen addressed widespread concern in the U.S. banking system after the collapse of Silicon Valley Bank last week, arguing that Americans should feel confident the banking infrastructure is “safe and sound.”
“America’s economy relies on a safe and sound banking system,” Yellen said in an interview with CBS’s “Face The Nation.” “Americans need to feel confident that the banking system is safe and sound.”
The failure of the bank last week sent shockwaves through the tech industry, as many startups and tech companies relied on the bank for financing. After bank officials announced plans to raise billions of dollars in capital to sure up its books, depositors flocked to pull their money from the bank.
Its collapse even saw shares in other major banks drop last week, but Yellen said the federal government was working to ensure depositors would be able to get their money and to contain any risk of contagion in the banking system.
“I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” Yellen said. We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound.”
But Yellen was reserved in saying what the ultimate outcome would be for Silicon Valley Bank after the Federal Deposit Insurance Corporation (FDIC) took the bank into receivership. She said those options could include an outside acquisition of the bank.
“This is really a decision for the FDIC as it decides on what the best course is to resolve this firm and I’m sure they’re considering a wide range of available options, including acquisitions,” Yellen said.
Experts have pointed to the continued hiking of interest rates by the Federal Reserve as one of the reasons why the bank went belly up. The Fed has hiked interest rates as it tries to tame inflation, and Yellen said it was up to the central bank to continue to decide how best to proceed in that regard.
“The Federal Reserve is independent and charged with making judgements about what the appropriate course of action is to address financial risks and also to achieve their inflation and employment goals,” Yellen said. “I’m not going to comment on what’s appropriate responses for them.”
–Updated at 10:48 a.m.