Yellen: Banking Situation “Stabilizing” 

March 21, 2023


Speaking Tuesday at the American Bankers Association, Treasury Secretary Janet Yellen said the U.S. banking system is “sound” and that the overall situation “is stabilizing.”

Yellen basically reiterated comments she made before the Senate Finance Committee Thursday following the March 10 takeover and shutdown of Silicon Valley Bank (SVB) by the Federal Deposit Insurance Corporation (FDIC) in an effort to protect deposits, and the collapse of Signature Bank in New York City two days later—the second and third largest bank failures in the U.S., respectively, since the 2008 financial crisis that led to the Great Recession. 

Last week the collapse of a third regional bank, San Francisco-based First Republic, was prevented when 11 of the biggest U.S. banks provided it with some $30 billion in funding.

The government is now determined to restore public confidence in the banking system and to prevent any more turmoil. Last week, the Department of Justice and the Securities and Exchange Commission launched separate investigations into the collapse of Silicon Valley Bank. And President Biden has called on Congress to impose tougher penalties on the executives of failed banks, including clawing back compensation and making it easier to prevent them from working in the industry ever again.

On Tuesday, Yellen stated in her prepared remarks that the government’s intervention was necessary to “protect the broader banking system.” She further conceded that additional rescue arrangements “could be warranted” if any new failures at smaller financial institutions were to pose a risk to stability. 

“Similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” she said.

Yellen is set to appear before Congressional panels two more times this week, in both the House and Senate chambers, where she’ll almost certainly face more questions about the government’s efforts to quell the recent banking failures. 

“Let me be clear: The government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe,” Yellen said Tuesday.

Democratic lawmakers and some economists have pointed to a rollback of some restrictions in 2018 of the 2010 Dodd-Frank law that was put in place after the Great Recession to prevent future banking failures.

Yellen, the former Chair of the Federal Reserve, has also described the Fed’s raising interest rates to combat inflation as the core source of SVB’s problems. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed. 

PHOTO credit: Tony Webster

Read more exclusive news from Political IQ.

Related

Newsletter

Get the featured stories in your email and don't miss out on important news.

Previous

Podcaster Comments NFL QB’s Wife Statement

Next

Podcaster Comments NFL QB’s Wife Statement