Yellen Assures Congress US Banking System is “Sound” Despite Collapse
Treasury Secretary Janet Yellen sought to reassure Congress Thursday that the U.S. banking system remained “sound” after a week of market tumult following the second largest bank collapse in the country's history.[0] Yellen testified before the Senate Finance Committee on President Biden’s 2024 budget proposal, touting the federal government’s “decisive and forceful actions” to shore up confidence in the banking system.[1]
Yellen said that uninsured deposits would not be protected by the government, noting that the “Deposit Insurance Fund, which is funded by fees on banks” is responsible for protecting deposits. Senator Mike Crapo, a Republican from Idaho, expressed his concerns about setting a “precedent of guaranteeing all deposits” and the market expectations that would come with it.[2] Yellen replied that “that's certainly not something that we're encouraging.”[3]
The government's response to the bank failures included the injection of $30 billion into First Republic Bank by 11 large U.S. banks, including Bank of America, Goldman Sachs, and JP Morgan.[4] Yellen also stressed that no taxpayer money was used or put at risk with the action.[5]
Republican Senator James Lankford of Oklahoma pressed Yellen on the issue of whether the uninsured deposit backstops would apply across the banking industry.[6] Yellen clarified that the decision of whether to guarantee uninsured deposits would be decided by a supermajority of the FDIC's board members, Yellen, and the President, depending on the circumstances.
Meanwhile, Senate Finance Chair Ron Wyden, a Democrat from Oregon, noted the importance of Congress taking “the most important step” of paying the bills incurred by presidents of both parties and taking a default off the table.[7] Yellen added that Mr. Biden is prepared to discuss limits on government spending but emphasized that negotiations over spending cuts should be separate from the debt limit fight.[7] “She declared that it could not be a prerequisite for increasing the debt limit,” she stated.[8] It is absolutely essential that the debt ceiling is increased.[8]
0. “Yellen tries to reassure Americans that bank collapse fallout will be contained” Iowa Public Radio, 16 Mar. 2023, https://www.iowapublicradio.org/news-from-npr/2023-03-16/yellen-tries-to-reassure-americans-that-bank-collapse-fallout-will-be-contained
1. “Treasury boss Yellen says US banking system ‘remains sound'” New York Post , 16 Mar. 2023, https://nypost.com/2023/03/16/treasury-sec-yellen-to-say-us-banking-system-remains-sound-on-capitol-hill/
2. “Janet Yellen: US banking system is ‘sound’ despite two collapses in a week” The Guardian, 16 Mar. 2023, https://www.theguardian.com/business/2023/mar/16/janet-yellen-us-banking-system-silicon-valley-signature-collapses
3. “Janet Yellen Addresses Tough Reality of Americans' Money Amid Bank Panic” Newsweek, 16 Mar. 2023, https://www.newsweek.com/janet-yellen-addresses-tough-reality-americans-money-amid-bank-panic-1788353
4. “Why Is Credit Suisse in Trouble? The Banking Turmoil Explained” The Wall Street Journal, 16 Mar. 2023, https://www.wsj.com/articles/why-is-credit-suisse-in-trouble-the-banking-turmoil-explained-6f8ddb5b
5. “Yellen seeks to reassure US legislators after bank collapse” Al Jazeera English, 16 Mar. 2023, https://www.aljazeera.com/news/2023/3/16/yellen-seeks-to-reassure-us-legislators-after-bank-collapse
6. “Treasury Secretary Yellen says not all uninsured deposits will be protected in future bank failures” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/svb-signature-bank-failures-yellen-says-us-banking-system-is-stable-and-deposits-remain-safe.html
7. “Treasury Secretary Janet Yellen tells Senate panel nation's “banking system is sound” after Silicon Valley Bank collapse” CBS News, 16 Mar. 2023, https://www.cbsnews.com/news/janet-yellen-congressional-testimony-today-banking-system-remains-sound-silicon-valley-bank-signature-bank-collapse/
8. “Yellen: Debt limit breach would be ‘devastating' for banks” Roll Call , 16 Mar. 2023, https://www.rollcall.com/2023/03/16/yellen-debt-limit-breach-would-be-devastating-for-banks/
