During a gathering of bankers at the American Bankers Association, Treasury Secretary Janet Yellen addressed recent regional bank collapses, projecting calm but suggesting that additional rescue arrangements may be necessary if the failure of smaller institutions threatens financial stability.
Yellen emphasized that despite recent events, the U.S. banking system remains sound, and overall, the situation is stabilizing.
Regulators announced that New York-based Signature Bank also failed during the same weekend, and all depositors, including those with uninsured funds exceeding $250,000, would be protected by federal deposit insurance.
San Francisco-based First Republic Bank was able to prevent collapse with the support of $30 billion raised by 11 of the largest U.S. banks. The government is now focused on restoring public confidence in the banking system, and investigations into the Silicon Valley Bank collapse have been launched by the Justice Department and the Securities and Exchange Commission.
President Joe Biden has tweeted on Congress to tough rules on banks and take tougher penalties on executives of defaulted banks.
Yellen stated that the government’s intervention was necessary to protect the broader banking system and that additional rescue efforts could be necessary if smaller institutions suffer deposit runs that pose a risk of contagion.
The government is closely monitoring the banking sector, and Yellen offered reassurances that the U.S. banking system remains sound and depositors can feel confident about the safety of their deposits.
She faced the Senate Finance Committee and will appear before congressional panels twice more this week to address the bank failures and the government’s efforts to prevent further turmoil.
However, Scott Anderson, the president of Zions Bank, does not believe that the 2018 rollback is related to the bank failures and cautioned Congress to have a thorough discussion before jumping to immediate conclusions.
Yellen emphasized the government’s commitment to taking necessary steps to ensure depositors’ savings and the banking system remain safe.