WASHINGTON – Biden administration officials argued Friday that safeguards enacted after the 2008 financial crisis would protect the U.S. economy in the wake of Silicon Valley Bank formwork.
Treasury Secretary Janet Yellen met with banking supervision on Friday to discuss the sudden development, according to the Ministry of Finance, and said the federal government was well equipped to deal with the situation.
“Secretary Yellen expressed full confidence in banking regulators to take appropriate action in response, noting that the banking system remains resilient and regulators have effective tools to deal with these types of events,” the department said in a reading from the meeting.
Yellen met with top officials from the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Controller of the Currency.
Earlier in the day, before the collapse of Silicon Valley Bank was announced, Yellen told House lawmakers during a budget hearing that “there are recent developments that relate to a few banks that I monitor very closely. And when banks experience financial losses, it is and should be a problem.”
During Friday’s White House briefing, one of President Joe Biden’s top economic advisers contrasted the closing of Silicon Valley Bank with the 2008 financial crisis.
“Our banking system is in a fundamentally different place than it was, you know, a decade ago,” Cecilia Rouse, chairwoman of the White House Council of Economic Advisers, told reporters. “The reforms that were put in place then really provide the kind of resilience that we want to see. So we have full confidence in our regulators.”
When pressed further about potential economic and financial fallout, Rouse said the reforms implemented after 2008 involved introducing bank stress tests and other tools regulators can use to protect the banking system.
California Department of Financial Protection and Innovation Friday took over and closed Silicon Valley Bank to protect deposits and names the FDIC as its receiver. The FDIC has formed a separate entity where all of the bank’s insured deposits will be available Monday morning.
The closure is the biggest bank crash since the 2008 financial crisis and the second biggest ever after that Washington Mutual collapsed during the industry-wide meltdown, according to FDIC data.
Democratic Representative Ro Khanna, whose district includes Silicon Valley, said Friday that he had contacted the White House and the Treasury Department to discuss the bank’s failure.
“I emphasized the importance of doing what is legally permissible and appropriate to support the bank, which is central to the startup and technology economy,” he said on Twitter.
Rep. Eric Swalwell, another California Democrat, tweeted that he, together with his colleagues from the state, is working to protect all depositors in Silicon Valley Bank, which at the end of December was the country’s 16th largest.
“We have to make sure that all deposits that exceed the FDIC limit of $250,000 are met. Banking is about trust,” he said. “If depositors lose confidence in the safety of their deposits above 250,000, then we are in trouble.”
The shutdown came after a tumultuous morning for the bank, with trading in its shares halted after they fell by double digits before markets opened. This drop came on the heels of a drop of more than 60% on Thursday.
Concerns about a run at SVB prompted Wall Street investors to dump other bank stocks. Shares of other prominent West Coast lenders took sharp dives Friday, including First Republic Bank, PacWest Bancorp and Western Alliance Bancorporation.
This article was originally published on NBCNews.com
