On Friday, Silicon Valley Bank (SVB), a major lender to tech startups, was taken over by regulators, sending shockwaves through the startup ecosystem. Many companies have had to scramble to find ways to meet payroll and other expenses.
In response, Treasury Secretary Janet Yellen made clear that the government would not bail out SVB, but is instead focused on helping depositors. Yellen told CBS in an interview on Sunday: “We are concerned about depositors and are focused on trying to meet their needs.”
Y Combinator, a kingmaker startup accelerator with over 1,000 portfolio startups impacted by the SVB collapse, has called on Congress to act more decisively to save the lender. In an open petition signed by over 3,500 chief executives, Y Combinator wrote: “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.”
Over 60 YC-backed Indian startups have more than $250,000 stuck in accounts with SVB, and nearly two dozen have more than $1 million tied with the lender. Yellen also noted that the U.S. government must ensure that Americans have faith in the banking system, saying, “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 about losing access to their money.”
The 2008 Financial Crisis
When the 2008 financial crisis struck, many investors and owners of systemic large banks received bailouts from the U.S. government. In response, reforms were put in place to ensure that similar scenarios would not occur in the future. Yellen made clear that this was not a situation in which a bailout would be appropriate.
The Impact on Small Businesses
Yellen stated that the government was focused on helping the tens of thousands of small businesses that are affected by the Silicon Valley Bank collapse. She noted: “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.”
The U.S. Government’s Response
The Treasury Secretary provided few details on the government’s next steps, but asserted that the situation was being handled with the utmost care and attention. She said: “I simply want to say that we’re very aware of the problems that depositors will have, and we’re working with regulators to try to address these concerns.”