WASHINGTON (AP) — A week after the second largest banking collapse in U.S. history, Treasury Secretary Janet Yellen will tell the Senate Treasury Committee that the country’s banking system “remains sound” and Americans can “be safe” about their deposits.
Yellen will be the first Biden administration official to face lawmakers over a decision to protect uninsured money at two failed regional banks, a move some observers have criticized as a “bank bailout.”
“The administration has taken decisive and vigorous action to increase public confidence in the US banking system,” Yellen said in prepared testimony released ahead of her appearance. “I can assure the members of the committee that our banking system remains sound and that Americans can be confident that their deposits will be there when they need them.”
In less than a week, Silicon Valley Bank, headquartered in Santa Clara, California, failed after depositors rushed to withdraw funds fearing for the health of the bank. Then regulators got together over the weekend and announced that New York-based Signature Bank also failed. They ensured that all depositors, including those holding over $250,000 in uninsured funds, are protected by federal deposit insurance.
The Justice Department and the Securities and Exchange Commission have since launched investigations into the collapse of the Silicon Valley bank.
Thursday’s hearing is set to deal with President Joe Biden’s budget proposal, but it comes after the sudden collapse of the country’s 16th-biggest bank and the top financial institution for tech entrepreneurs. While Yellen will be ready to discuss spending proposals, the hearing will inevitably turn to the government’s decision-making process to intervene in the bank failure.
Lawmakers are likely to question whether the money pledged to restore depositors is a bailout, the extent to which taxpayers will be hooked for intervention and the possibility of new regulation affecting the banking system.
Yellen said on CBS’s Face the Nation last Sunday that a bailout was not on the table and declared, “We will not do this again,” referring to the US government’s response to the 2008 financial crisis that led to massive government bailouts of major US banks.
Yellen, a former Federal Reserve Chair and former San Francisco Federal Reserve Chair during the 2008 financial crisis, was a leading figure in last weekend’s resolution designed to prevent a broader systemic problem in the banking sector.
“This week’s actions demonstrate our determination to ensure depositors’ savings remain safe,” she said in testimony Thursday.
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