Treasury Secretary Janet Yellen speaks during a Senate Finance Committee hearing at the U.S. Capitol last Thursday. She will speak to the American Bankers Association on Tuesday. Photo by Bonnie Cash/UPI |
License PhotoMarch 21 (UPI) — Treasury Secretary Janet Yellen is expected to tell the American Bankers Association on Tuesday that the government is prepared to protect all depositors if a bank fails similar to what it did for Silicon Valley Bank in California and Signature Bank in New York.
Yellen is expected to tell one of the country’s largest banking lobbies that the move to go beyond protecting depositors with more than $250,000 in institutions is warranted to prevent the risk of a deposit run spreading the banking crisis.
Her advanced comments were reported by CBS News, CNBC and The New York Times. She will make the comments at the association’s summit in Washington, D.C., about 10 a.m., EDT.
The failures of Silicon Valley Bank, which catered to tech startups, and Signature Bank, which focused on cryptocurrencies, stunned the banking world and threatened to create a domino effect that spread overseas.
“The steps we took were not focused on aiding specific banks or classes of banks,” Yellen is expected to say, according to prepared remarks. “Our intervention was necessary to protect the broader U.S. banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
Federal regulators have continued to work with 11 other large banks that deposited some $30 billion into First Republic Bank, The New York Times noted.
“The situation demanded a swift response,” Yellen’s prepared statement reads. “In the days that followed, the federal government delivered just that: decisive and forceful actions to strengthen public confidence in the U.S. banking system and protect the American economy.”
Since that initial scare, the banking situation has stabilized because of the reassurances and the U.S. banking system remains sound, she said.
“The Fed facility and discount window lending are working as intended to provide liquidity to the banking system,” Yellen said. “Aggregate deposit outflows from regional banks have stabilized.”
