The federal government is closely watching the collapse of a California-based bank, according to Treasury Secretary Janet Yellen Friday.
In testimony before Congress, Yellen spoke about concerns about the failure of the Silicon Valley Bank (SVB), which was shut down by the state of California this week.
The cabinet secretary indicated that the federal government is monitoring the activities of the bank and potential issues stemming from its failure.
Yellen told the House Ways and Means Committee that she was “monitoring” the situation “very carefully.”
The secretary added, “when banks experience financial losses, it is and should be a matter of concern.”
Furthermore, the Federal Deposit Insurance Corporation (FDIC) announced that it would back bank account holders during this time of uncertainty.
According to the agency, the California Department of Financial Protection and Innovation closed the bank Friday and appointed the FDIC as receiver.
As a result, the FDIC created the Deposit Insurance National Bank of Santa Clara and backed all insured deposits of the former bank.
“All insured depositors will have full access to their insured deposits no later than Monday morning,” said the FDIC. The bank’s checks will continue to clear, the agency asserted.
Silicon Valley Bank formerly operated 17 branches in California and Massachusetts and as of the end of 2022 had more than $175 billion in deposits and more than $200 billion in total assets.
In particular, conservative critics criticized the bank for backing a number of Environment, Social and Governance (ESG) practices, including diverting investments to a number of policies that align with left-wing causes.
Interesting proclamation from Silicon Valley Bank just over 1 year ago. @SVB_Financial pic.twitter.com/UmVCVoPKNo
— Vivek Ramaswamy (@VivekGRamaswamy) March 10, 2023
The latest concerns mirror some of the early stages of the 2008 financial crash. However, it is unclear just how much the bank’s collapse may impact the national economy.
One analyst went as far as to suggest that the collapse may cause the Federal Reserve to start cutting interest rates, which would reverse its current policy to reduce inflation. The Fed has not indicated such a course of action, though SVB’s issues have so far caused a rally in the value of bonds.