Treasury Secretary Janet Yellen said Americans should continue to have confidence in the stability of the banking system, but clarified that regulators’ decision to support all deposits at the two lenders that failed last week was an exception to the rule. .
Testifying before the Senate Finance Committee on Thursday, Yellen said authorities invoked the «systemic risk exception» to support all funds, including those that exceeded the Federal Deposit Insurance Corporation’s $250,000 standard limit, at Silicon Valley Bank and Signature Bank when both lenders took over and closed within days of each other.
A bank “only gets that treatment” if regulators determine it meets certain criteria. As a result, Yellen said, depositors at other banks may not be guaranteed similar protections.
The Treasury chief appeared before lawmakers 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 potential financial crisis, and took the opportunity to reassure Wall Street and everyday banking customers «that our banking system remains strong and Americans can trust that their deposits will be there». when they need them.»
“This week’s actions demonstrate our strong commitment to ensuring that depositors’ savings remain safe,” he said.
Asked by Sen. James Lankford (R-Okla.) if all deposits at Oklahoma’s community banks would now be fully insured, Yellen responded that «a bank only gets that treatment» under the systemic risk exception rule, which requires a two-thirds majority vote. of the boards of the Federal Reserve, the FDIC, and the Secretary of the Treasury in consultation with the president.
During the hearing, Yellen also addressed inflation, which she says remains the Biden Administration’s top economic concern, even as it continues to post incremental declines. February’s 6% level remains well above the Fed’s 2% target.
“The president is doing everything he can – through the Reducing Inflation Act, lowering the cost of prescription drugs, lowering the cost of health care, and using the strategic oil reserve to try to reduce and address the higher gas and energy costs for Americans.” Yelen said.
His testimony came as financial markets registered some improvement after a battering during the previous day’s session. The partial recovery followed reports that two struggling banks, Swiss lending giant Credit Suisse and US regional bank First Republic, may be receiving a lifeline.
The rally followed a pair of media reports, unconfirmed by NBC News, that First Republic was in talks with potential financial backers. Those developments came on the heels of Credit Suisse’s announcement Thursday that it would borrow $54 billion from Switzerland’s central bank.