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US Treasury Secretary Janet Yellen attempted to allay fears by saying that the US banking system is "stabilizing" following the failures of SVB and Signature Bank.
United States Treasury Secretary Janet Yellen said that the US banking system is stable after regional banks collapsed, further rescue measures may be necessary if further collapses at small banks pose a danger to economic stability.
In prepared statements for a speech to the American Bankers Association on Tuesday, Janet Yellen underscored that "the situation is stabilizing" overall and "the US banking system remains sound," according to Reuters.
The statements by US Treasury Secretary Janet Yellen follow a string of worrying events in the banking sector this month causing the US bank crisis.
On March 10, Santa Clara, California-based Silicon Valley Bank collapsed as a result of depositors' hasty withdrawals of funds in response to concerns about the bank's stability. The SVB collapse was the second-largest in US history.
After the crashes, federal authorities acted swiftly to restore liquidity by instituting a loans program and guaranteeing the safety of all deposits, insured and otherwise.
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Janet Yellen Says Gov't Intervention Was Necessary Amid US Bank Crisis
Janet Yellen said that the US government's "intervention was necessary to protect the broader US banking system." She added that identical measures "could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion," according to Barrons.
The federal government has assured everyone who has money at either bank that their deposits are safe, including those who have more than $250,000 in uninsured accounts.
According to Janet Yellen, the Federal Reserve's new Bank Term Funding Facility and discount window loans are operating as planned to provide stability to the banking system, and the total amount of deposits being withdrawn from local banks has steadied.
The banks' last week decision to deposit $30 billion into the insolvent First Republic Bank "represents a vote of confidence in our banking system," said Yellen, per The Hill.
US Treasury Secretary Yellen further noted the US economy requires a "dynamic and diverse banking system" with major, mid-sized, and small banks supporting families, small enterprises, and financial services competitiveness.
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