A week after the second largest banking collapse in US history, Treasury Secretary Janet Yellen told the Senate Finance Committee on Thursday that the nation’s banking system “remains strong” and that Americans “they can feel secure” with their deposits.
Yellen is the first Biden administration official to confront lawmakers over the decision to protect uninsured money at two failing regional banks, a move some Republicans have criticized as a bank “bailout.”
“The administration took decisive and forceful steps to strengthen public confidence” in the US banking system, Yellen said in testimony before the commission. “I can assure committee members that our banking system remains strong and Americans can feel confident that their deposits will be there when they need them.”
In less than a week, Santa Clara, California-based Silicon Valley Bank collapsed after depositors rushed to withdraw money amid anxiety over the bank’s health. Then regulators met over the weekend and announced that New York-based Signature Bank had also failed. They made sure that all depositors, including those with uninsured funds in excess of $250,000, were protected by federal deposit insurance.
Since then, the Department of Justice and the Securities and Exchange Commission have launched investigations into the collapse of Silicon Valley Bank.
Thursday’s hearing is meant to address President Joe Biden’s budget proposal, but comes after the sudden collapse of the country’s 16th-largest bank and the go-to financial institution for tech entrepreneurs. While Yellen will be prepared to speak on spending proposals, the hearing will inevitably focus on the government’s decision-making process to intervene in the bank’s failure.
Lawmakers will likely question whether the money pledged to recover depositors is a bailout, the degree to which taxpayers will be affected by the intervention and the possibility that new regulation will affect the banking system.
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