Yellen says the US is not considering “general” bank deposit insurance
Treasury Secretary Janet Yellen said regulators are not looking for “general” deposit insurance to stabilize the US banking system, and that the heads of the recently failed US lender must be held accountable.
“I have not considered or discussed anything to do with general insurance or deposit guarantees,” Yellen said at a hearing before a Senate subcommittee on Wednesday.
Yellen has previously said the US is ready to take further steps to protect depositors if smaller lenders are threatened. Her staff is exploring ways to temporarily raise the federal insurance limit to more than $250,000 without Congressional authorization in the event the crisis deepens, Bloomberg News reported Monday.
Yellen, along with Federal Reserve Chairman Jerome Powell, has been at the center of the US government’s efforts to restore stability to the US banking sector and calm financial markets after the collapse of some medium-sized lenders. Regulatory oversight and their moves to contain the crisis have faced intense scrutiny from legislators and investors.
Her testimony Wednesday comes shortly after the Fed’s rate hike decision, with the central bank saying in a press release that the US baking system is “sound and resilient.” Powell also said in a news conference that the Fed is determined to learn lessons from the situation.
A permanent change to the Federal Deposit Insurance Corp.’s $250,000 limit. would require congressional approval, but the Treasury has access to a pot of about $30 billion in the Exchange Stabilization Fund that some officials have said could be used for a temporary measure.
“This is not something we’ve looked at,” Yellen said on Wednesday, adding that now is not the right time to determine whether the limit should be raised.
The prospect of the Treasury Department making such a unilateral move baffled Republican lawmakers. Senator Bill Hagerty of Tennessee told Yellen at the hearing that it would be an “abuse” of the stabilization fund.
‘Responsibility’
Yellen also said at the hearing that executives responsible for a bank’s collapse should not profit if shareholders and investors take losses.
“This is an important form of accountability and we are happy to work with you on that legislation,” said Yellen. “It is important to be clear: shareholders and debt holders of the bankrupt banks are not protected by the government,” she had said earlier in her opening remarks.
The Federal Deposit Insurance Corp. announced on March 12 that it would underwrite all deposits with failed Silicon Valley Bank and Signature Bank. On the same day, the Federal Reserve launched an emergency lending program and eased the terms of its standing facility for banks facing liquidity needs in an effort to reassure depositors across the country.
Speaking at a conference of bankers on Tuesday, Yellen said the government was ready to reiterate the measures it has taken to rescue uninsured deposits at the bankrupt lenders “if smaller institutions face deposits that pose the risk of contagion .”
Wednesday’s hearing, before the Financial Services and General Government Subcommittee, was scheduled to give lawmakers a chance to question Yellen about President Joe Biden’s proposed 2024 budget. The committee has previously released the text of its prepared remarks.
On the budget side, Yellen will address the government’s controversial request for an additional $14 billion for the Internal Revenue Service, just a year after Congress allocated $80 billion to rebuild the IRS over the next decade. to build.
“Our budget request provides stable operational funding that allows taxpayers to receive the best possible service,” said Yellen. “It will complement the one-time long-term investment in the IRS.”