The U.S. government on Sunday made moves to save the tech industry’s Silicon Valley Bank.
The government announced that it would ensure that all depositors in Silicon Valley Bank have their money back.
In a joint statement, Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and FDIC Chairman Martin Gruenberg reiterated that that taxpayers funds won’t be used to foot would not foot the banks and also added that this wouldn’t save everyone.
“Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed,” the regulators said in their joint statement.
“Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”
A Treasury official told the Wall Street Journal that the government’s efforts isn’t a bailout as it doesn’t protect stock and bondholders in both banks.
Silicon Valley Bank collapsed last week.
By Wednesday, the bank disclosed that it had sold its government bond assets at steep losses ($1.8 billion) because it didn’t have enough cash on hand and announced it needed to raise more than $2 billion.
This made tech startups to start withdrawing their money and the situation got out of hand when the bank’s CEO tried to calm the startups down.
The panic quickly spread to venture capital firms, and they urged their startups to get their money out of the bank while they could.
On Friday, Silicon Valley Bank was shut down by regulators.