Treasury Secretary Janet Yellen will try to reassure Congress that despite the collapse of two banks in the last several days and ongoing consumer jitters about the state of the financial services sector, the nation’s banking system nonetheless remains strong.
In testimony before the Senate Finance Committee Thursday, Yellen is expected to tout the government’s “decisive and forceful actions to strengthen public confidence in our banking system,” according to her prepared opening remarks.
She’ll also note the Treasury Department’s work with the Federal Reserve and FDIC to protect all depositors.
“On Monday morning, customers were able to access all of the money in their deposit accounts so they could make payroll and pay the bills,” Yellen is expected to say about the customers of the two banks, pointing out that investors in those banks will not fare as well. “Shareholders and debtholders are not being protected by the government. Importantly, no taxpayer money is being used or put at risk with this action. Deposit protection is provided by the Deposit Insurance Fund, which is funded by fees on banks.”
Yellen will also highlight the Federal Reserve’s plan to give additional support to the banking system by setting up a new lending facility that is intended to help financial institutions meet the needs of all their 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 is expected to say. “This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe.”
In her statement, Yellen also plans to address high inflation, stating there has been some moderation in headline inflation, but “more work needs to be done.” In February, inflation cooled, but remains stubbornly high, at 6%. The Fed must decide soon whether to keep boosting interest rates to try to slow inflation, or to ease up because of the pressure higher rates exert on the banking industry.
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