Treasury Secretary Janet Yellen said on Thursday that Americans should have faith in the stability of the banking system, but clarified that regulators’ decision to backstop all deposits at two lenders that failed last week is a threat to the standard. There was one exception.
Testifying before the Senate Finance Committee, Yellen said officials invoked a “systemic risk exception” to backstop all funds at Silicon Valley Bank and Signature Bank, including those exceeding the Federal Deposit Insurance Corporation’s standard $250,000 limit. Did. Close both lenders within days of each other.
A bank “only receives that treatment” if regulators determine that it meets certain criteria. As a result, Yellen said, depositors at other banks cannot be guaranteed the same protection.
Yellen appeared before lawmakers on Thursday as part of scheduled testimony to address President Joe Biden’s fiscal year 2024 budget request. But the hearing coincided with turmoil in global markets over fears of a possible financial crisis, and he used the opportunity to reassure Wall Street and ordinary bank customers “that our banking system remains sound and Americans can feel confident.” They are sure that their deposits will be there when they need them.
“This week’s action demonstrates our unwavering commitment to ensuring that depositors’ savings are protected,” he added.
Asked by Sen. James Lankford, R-Okla., whether all deposits in Oklahoma community banks would now be fully insured, Yellen said that under the systemic risk exception rule “a bank receives the only treatment” for which two A three-thirds majority vote is required. The Board of the Federal Reserve, the FDIC, and the Treasury Secretary, in consultation with the President.
During the hearing, Yellen also addressed inflation, which she said remains the Biden administration’s No. 1 economic concern, even after it continues to decline incrementally. February’s 6% level is well above the Fed’s 2% target.
“The President is doing all he can – through the Inflation Reduction Act, lowering prescription drug costs, lowering health care costs and using the Strategic Petroleum Reserve – to reduce higher gas and energy costs for Americans. To try to mitigate and address.” Yellen said.
Financial markets saw some recovery after a fall during the previous day’s session. The partial recovery followed reports that two troubled banks, Swiss lending giant Credit Suisse and US regional bank First Republic, could receive lifelines.
The upvote came after a pair of unconfirmed media reports, by NBC News, that First Republic was in talks with potential financial backers. The development comes after Credit Suisse announced on Thursday that it would borrow $54 billion from Switzerland’s central bank.