On Thursday, Janet Yellen, the Secretary of the Treasury, attempted to assure Congress that the American banking system is still “solid” following a week of market chaos.[0]
On Thursday, Yellen testified to Congress in regards to President Joe Biden’s proposed budget for the 2024 fiscal year.[1] At the hearing, taking place during a tumultuous period of global markets due to concerns of a potential financial crisis, she sought to soothe Wall Street and regular bank customers alike, expressing that “the banking system remains sound and Americans can trust that their deposits will be available when they need them.”[2]
The government’s “decisive and forceful actions” to restore public faith in the banking system were praised by Yellen, following the sudden collapse of Silicon Valley Bank and the FDIC’s subsequent takeover of it approximately one week ago.[3] Credit Suisse shares had plunged on Wednesday, prompting stock markets to fall in the U.S. and around the world, amid rising concerns about the stability of the global banking system.[4]
A joint statement from the Federal Reserve, Treasury Department, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency expressed appreciation for the show of support from a group of large banks, noting that it demonstrated the strength of the banking system.[5]
Yellen stated plainly that she doesn’t think the GOP’s proposed plan to prioritize payments on government debt and Social Security should the U.S. reach its debt maximum would work. She informed the committee that the government, on average, disburses millions of payments per day, and the systems are designed to ensure all the bills are paid in a timely manner and not to select which ones to settle.[6]
In response to a question by Washington Democrat Suzan DelBene, Yellen said it’s critical that the government pay all its bills as they come due.[7] If officials think “there’s some short cut around it that will avoid economic chaos, we’re kidding ourselves. Because not paying the government’s bills will produce economic and financial collapse.”[7]
In further questioning, GOP Senator James Lankford asked Yellen whether that policy’s implication would be that small banks would become less appealing to depositors with accounts exceeding the FDIC’s $250,000 per person, per bank insurance limit.[8] Yellen stated that they are not encouraging that action.[8]
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. “Treasury Secretary Yellen says bank rules need to be ‘reexamined’ following bank failures” WFTV Orlando, 16 Mar. 2023, https://www.wftv.com/news/local/treasury-secretary-yellen-says-bank-rules-need-be-reexamined-following-bank-failures/75SJ45NH2VAI7BKNR4CJQ5PHHM
2. “Treasury Secretary Yellen seeks to soothe markets and depositors, saying U.S. banking system ‘remains sound’” NBC News, 16 Mar. 2023, https://www.nbcnews.com/politics/economics/treasury-janet-yellen-banking-system-senate-finance-testimony-rcna75253
3. “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/
4. “Credit Suisse shares soar after the bank secures a $54 billion lifeline” NPR, 16 Mar. 2023, https://www.npr.org/2023/03/16/1163837728/credit-suisse-banking-stock-markets
5. “US Taps JPMorgan’s Dimon, Wall Street Banks to Bolster Faith in Finance Sector” Bloomberg, 16 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-16/jpmorgan-s-dimon-met-with-yellen-on-first-republic-thursday
6. “Yellen Trashes GOP Plan to Prioritize Debt Payments” The Fiscal Times, 16 Mar. 2023, https://www.thefiscaltimes.com/2023/03/16/Yellen-Trashes-GOP-Plan-Prioritize-Debt-Payments
7. “Yellen warns lawmakers default will produce ‘financial collapse’” Detroit News, 10 Mar. 2023, https://www.detroitnews.com/story/news/nation/2023/03/10/yellen-warns-lawmakers-default-will-produce-financial-collapse/69995224007
8. “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