According to Yellen, the US banking system remains “solid” amid the market turmoil.
WASHINGTON — Treasury Secretary Janet L. Yellen said Thursday that the country’s banking system is sound and that the Biden administration is committed to ensuring American bank deposits are safe.
Ms. Yellen’s comments, in prepared testimony before a Senate Finance Committee hearing, came days after the Treasury Secretary and other federal regulators scramble to shore up the financial system and stem the fallout from the Silicon Valley bank collapse.
On Sunday, the Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation announced they will ensure all depositors at Silicon Valley Bank and Signature Bank, which were also seized by regulators, are repaid in full.
In a bid to forestall a broader liquidity crisis, the Fed also announced on Sunday that it would lend to banks and accept their Treasuries and other holdings as collateral even if rising interest rates had hurt the value of those assets.
“I can assure 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,” Ms Yellen said in prepared remarks. “This week’s actions demonstrate our determination to ensure depositors’ savings remain safe.”
The bank’s failure has raised questions about why federal regulators failed to recognize the risks at Silicon Valley Bank, which was growing rapidly and taking on a large number of depositors from the tech industry. And the government bailout has fueled accusations that the Biden administration is trying to bail out wealthy investors.
Ms Yellen said the bailout was to ensure bank customers could access their money, pay bills and do payroll. She noted that shareholders and creditors are not protected from losses.
“It is important that no taxpayers’ money is used or put at risk in this action,” Ms Yellen said, adding that the money used to repay depositors comes from fees imposed on banks.
The Treasury Secretary described the Federal Reserve’s lending facility as an attempt to provide additional support to the banking system and “to help financial institutions meet the needs of all their depositors.”
Officials continue to worry about volatility in banking sectors around the world. The major Swiss bank Credit Suisse was struggling to survive on Wednesday as investors feared it could run out of money.
Treasury Department officials monitored the situation Wednesday in coordination with their global counterparts.