In the wake of regulators’ decisions to shut down two banks, Treasury Secretary Janet Yellen sought to reassure members of Congress about the state of America’s financial system
In the wake of regulators’ decision to shut down two imperiled lenders to stem bank runs, Treasury Secretary Janet Yellen sought to reassure members of Congress that the U.S. financial system remains strong.
In prepared remarks before the Senate Finance Committee about President Joe Biden’s fiscal year 2024 budget request, Yellen also addressed the recent turmoil in the banking sector. She said that regulators’ “decisive and forceful actions” to take control of California’s Silicon Valley Bank and Signature Bank in New York — and to guarantee all their deposits, including those exceeding the federal $250,000 insurance cap — were designed to instill confidence among American depositors.
“I can reassure the members of the Committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them,” she said. “This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe.”
Yellen was speaking as part of Biden’s push to pass a $6.8 trillion budget, which proposes higher taxes on the wealthy to help shore up Social Security and Medicare along with increased military spending.
In the prepared remarks, Yellen also mentioned inflation, which continues to post incremental declines. February’s 6% level remains well above the Federal Reserve’s 2% target.While the White House heralded the passage the Inflation Reduction Act last year as a means to help to curb price growth, Yellen did not mention the legislation by name.
“We have seen some moderation in headline inflation, but more work needs to be done,” Yellen said. “Our administration will continue to build on the actions we’ve taken to expand supply and provide cost relief in areas like energy and healthcare.”
Yellen’s remarks come one day after global financial markets were shaken by concerns about the viability of Credit Suisse, one of the largest and most important financial institutions in the world. Early Thursday, the Swiss lender said it would accept a $54 billion loan from the Swiss National Bank to help steady its finances.
The announcement buoyed Credit Suisse shares even as unease on Wall Street persisted, with First Republic and other regional U.S. banks trading sharply lower on Thursday morning.
Yellen is likely to face questions about U.S. banks’ exposure to Credit Suisse and their potential resilience if faced with a deepening global financial crunch.