Treasury Secretary Janet Yellen sought to reassure Congress Thursday that the U.S. banking system remains “sound” after the second largest bank collapse in its history.[0] Yellen testified before the Senate Finance Committee on President Biden’s 2024 budget proposal.[1]
After Silicon Valley Bank experienced a sudden failure and was taken over by the FDIC, Yellen praised the government’s “resolute and vigorous measures to reinstate public trust in our banking system” approximately one week ago. She asserted that the government’s measures display its dedication to safeguarding “depositors’ funds” and enabled bank customers to cover salaries and settle their bills.[2]
Senator Mike Crapo said he was ‘concerned about the precedent of guaranteeing all deposits and the market expectation expectation moving forward.’[3] Yellen responded that the government’s response to the collapse of Silicon Valley Bank and Signature Bank were “decisive and forceful actions to strengthen public confidence in our banking system”, and added that “shareholders and debt holders are not being protected by the government. Importantly, no taxpayer money is being used or put at risk with this action. Deposit protection is provided by the Deposit Insurance Fund, which is funded by fees on banks.”
Yellen commented that the Treasury Department and other regulators had to step in with Silicon Valley Bank due to their awareness that such a collapse could cause a chain reaction and put other banks at risk.[4] On Tuesday, Moody’s bond credit rating agency downgraded the U.S. banking system and issued warnings of potential downgrades for six banks.[5]
Yellen also warned that “a default on our debt would trigger an economic and financial catastrophe” and urged Congress to address the debt limit “without conditions and without waiting until the last minute.”[6]
In conclusion, Yellen said that the government needs to “analyze carefully what happened that triggered these bank failures and reexamine our rules and supervision and make sure that they’re appropriate to address the risks that banks face.[7]
0. “Yellen tells Congress that U.S. banking system is “sound”” Axios, 16 Mar. 2023, https://www.axios.com/2023/03/16/yellen-congress-us-banking-system
1. “Janet Yellen news WATCH LIVE: Treasury Secretary testifies before Senate Finance Committee today” Washington Examiner, 16 Mar. 2023, https://www.washingtonexaminer.com/policy/economy/yellen-testify-finance-committee
2. “Yellen on Watch for Banks Tightening Credit After SVB Meltdown” Yahoo Entertainment, 16 Mar. 2023, https://www.yahoo.com/entertainment/yellen-seeks-reassure-congress-banks-110000036.html
3. “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
4. “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
5. “Treasury Secretary Yellen to tell Congress ‘our banking system remains sound’” Yahoo News, 16 Mar. 2023, https://news.yahoo.com/treasury-secretary-yellen-to-tell-congress-our-banking-system-remains-sound-110018961.html
6. “Yellen, House Republicans spar over tax increases, debt limit” Roll Call , 10 Mar. 2023, https://www.rollcall.com/2023/03/10/yellen-house-republicans-spar-over-tax-increases-debt-limit/
7. “Yellen Open To Reexamining Bank Regs And Oversight After They Failed To Prevent SVB Collapse” TPM, 16 Mar. 2023, https://talkingpointsmemo.com/news/yellen-open-to-reexamining-bank-regs-and-oversight-after-they-failed-to-prevent-svb-collapse