WASHINGTON – Treasury Secretary Janet Yellen on Thursday offered reassurances to lawmakers and the American public, pledging that the “banking system remains sound” as concerns over the stability of the U.S. financial system continue to mount.
The recent decision to shut down two at-risk lenders has prompted questions about the overall health of global institutions, particularly in light of the recent crisis experienced by Silicon Valley Bank, with was the 16th largest bank in the country in terms of deposits.
Yellen, who was testifying before the Senate Committee on Finance, remained steadfast in her confidence in the financial system, highlighting the resilience of the U.S. banking industry and the measures in place to safeguard against such crises.
“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,” Yellen said. She explained that the FDIC insures deposits up to $250,000 per account and that the agency has successfully protected bank customers during past financial crises.
She faced sharp questions from lawmakers about the terms of the rescue for troubled banks. Sen. James Lankford (R-Okla.) questioned whether a community bank in his home state of Oklahoma would get the “same treatment as SVB Bank just got.”
Yellen responded that such a rescue would only happen if federal regulators as well as the Treasury secretary and the president determine that “the failure to protect uninsured depositors would create a systemic risk and significant economic and financial consequences.”
Yellen was initially invited to testify about President Joe Biden’s budget proposal for the 2024 fiscal year, which was released last week. Yellen said the budget seeks to increase taxes for the wealthy to strengthen Social Security and Medicare. She also discussed the ongoing inflation.
Sen. Mike Crapo (R-Idaho) criticized the $6.8 trillion budget proposed by Biden, calling it “short-sighted and partisan.” He also raised concerns about the president’s reluctance to negotiate with Republicans regarding fiscal policies related to the new extension of the debt ceiling.
Sen. John Cornyn (R-Texas) was equally critical and emphasized the need to address the budget proposal in a bipartisan approach, something he believes “seems uninteresting” to the president.
But Yellen attempted to refute any claims of Biden’s administration ignoring the Republican perspective. She reassured lawmakers that the president is willing to involve both sides of the government in discussions regarding the budget and other decision processes.
She also emphasized the importance of continued collaboration and cooperation between the administration and members of Congress in addressing fiscal matters and ensuring the financial system’s stability. “He stands ready to work with Congress,” she said.