Yellen Tells Lawmakers That The American Banking System ‘Remains Sound’ After Two Banks Collapse

On Thursday morning, Janet Yellen, Treasury Secretary, told lawmakers that the American financial sector is in good shape. “remains sound” despite two recent bank failures.

Federal Deposit Insurance Corporation (FDIC), currently manages $212 billion of assets held by Silicon Valley Bank. California state regulators closed the bank’s doors on Friday to increase confidence in the financial sector. Similar actions were taken to close Signature Bank’s $110 billion assets in New York on Sunday.

Yellen, who was originally scheduled for testimony on the budget proposal last week by President Joe Biden’s, began her remarks by informing legislators that the Treasury Department (the Federal Reserve) and the FDIC had successfully protected the deposits of two bank failures.

“I can reassure the members of the Committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them,” She commented. “This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe.”

The economist said that Signature Bank and Silicon Valley Bank customers were also included. “able to access all of the money in their deposit accounts so they could make payroll and pay the bills” As of Monday morning. Deposit Insurance Fund provided the assets, which are funded by fees on banks. Federal officials didn’t protect shareholders or debtholders.

“This week, the government took decisive and forceful actions to strengthen public confidence in our banking system,” Yellen said. “The Federal Reserve is providing additional support to the banking system with a new lending facility. This will help financial institutions meet the needs of all of their depositors.”

Opening statements by Ron Wyden (D–OR) and Mike Crapo (R–ID), Senate Finance Committee Chair, were also influenced by the financial turmoil. “Nerves are frayed at the moment,” Wyden acknowledged Wyden to Yellen. “One of the most important steps the Congress can take now is make sure there are no questions about the full faith and credit of the United States.”

Silicon Valley Bank announced last week a $1.75 Billion share sale. The company suffered severe losses due to the liquidation long-term assets within a $21 Billion bond portfolio. This raised concerns among startups and venture capital firms about the safety of their deposit accounts. Due to higher interest rates across the economy, the Federal Reserve’s actions to lower inflation had caused the portfolio to lose value.

Yellen and Jerome Powell, Federal Reserve Chair, and Martin Gruenberg, Chairman of FDIC, made the observation in a statement Sunday that the banking system is “fragile”. “remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry.” They promised it “no losses” Silicon Valley Bank’s collapse would also be a result of its failure. “borne by the taxpayer.”

Silicon Valley Bank had deposits that exceeded $250,000, and provided services to almost half of the venture-backed tech and healthcare companies in the United States. Silicon Valley Bank’s deposits were guaranteed by regulators so that the rest of the financial system (in which approximately half the deposits exceed $250,000) would be protected.

“I am concerned about the precedent of guaranteeing all deposits and the market expectation moving forward,” Crapo said to Yellen, noting “rising interest rates” Inflation control efforts by the Federal Reserve are causing these changes “impacting household budgets, the federal government’s coffers, and, as we saw this week, our banking system.”

“From Yellen Tells Lawmakers That The American Banking System ‘Remains Sound’ After Two Banks Collapse“

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