Janet Yellen Tweaks Bank Safety Message Amidst Congressional Opposition
US Treasury Secretary, Janet Yellen, has made a series of public addresses in the past week in an attempt to reassure the American public that the US banking system is safe amidst the ongoing banking crisis. However, her message has not been well-received by bankers and Wall Street as they were hoping for a government guarantee for all $19.2 trillion in US bank deposits until the crisis calms down. Yellen has repeatedly emphasized that the US will safeguard deposits but has stopped short of providing a blanket guarantee.
In her latest address to a U.S. House of Representatives Appropriations subcommittee hearing, Yellen clarified that further guarantees for uninsured deposits would come in the form of rescues for depositors of individual failing banks where problems threaten to spark runs on other banks. She also stated that regulators and the Treasury were prepared to make comprehensive deposit guarantees at other banks as they did at failed Silicon Valley Bank and Signature Bank. However, Yellen has not considered a move to circumvent Congress and grant “blanket insurance” on all US bank deposits as this would
require congressional approval under 2010 reforms.
Yellen’s reluctance to endorse a universal backstop has drawn criticism from investors including hedge fund manager Bill Ackman. They argue that a universal guarantee is needed to prevent depositors at small and mid-size banks from fleeing for perceived safety at large banks viewed as “too big to fail.” Although Yellen’s comments helped lift broad stock indexes, regional bank shares, including those of struggling First Republic Bank, continued to slide.
Staff Reporter
