Treasury Secretary Yellen tells Congress ‘our banking system remains intact’

US Treasury Secretary Janet Yellen is set to tell members of the Senate Finance Committee on Thursday that the US banking system remains “healthy” as the effects of the three bank failures in less than a week are still being felt in the financial markets and beyond.

“I can assure the committee members that our banking system remains intact, and that Americans can feel confident that their deposits will be there when they need them,” Yellen is set to tell the Senate before a scheduled hearing on President Biden’s proposed budget. “This week’s actions demonstrate our firm commitment to ensuring that depositors’ savings remain safe.”

On Sunday, Yellen, along with Federal Reserve Chairman Jerome Powell and Federal Insurance Corporation Chairman Martin Greenberg, announced that the government would back all deposits from the failed Silicon Valley bank after it was seized last Friday.

“Most importantly, don’t use taxpayer money or jeopardize it with this action,” Yellen says. “Deposit protection is provided by the Deposit Insurance Fund, which is financed by fees charged to banks.”

Federal Reserve He said well On Sunday, it will provide financing to banks through a new facility to help ensure banks can meet all depositors’ withdrawals, backing essentially all deposits — both insured and uninsured — across the US financial system.

It will also reiterate Yellen’s prepared remarks that the government is protecting the shareholders and debt holders of failing banks.

New York’s Signature Bank, which served clients in the cryptocurrency world, was taken over by regulators on Sunday, becoming the third-biggest bank ever to fail in the US’s Silicon Valley bank, the second-biggest failure of all time, bested only by Washington Mutual in 2008. .

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Bond credit rating agency Moody’s on Tuesday downgraded the US banking system and made six banks aware of the downgrade.

US Treasury Secretary Janet Yellen testifies before the US House Ways and Means Committee hearing on President Joe Biden’s budget request for fiscal year 2024 on Capitol Hill in Washington, US, on March 10, 2023. REUTERS/Evelyn Hochstein

In the wake of these failures and forfeiture, lawmakers have begun to demand a look at the collapse.

House Financial Services Committee Democratic Rep. Maxine Waters (D-Calif.) told Yahoo Finance on Tuesday that a decline in capital requirements was responsible for the crash, and said hearings will be held soon to better understand what went wrong.

Waters has called for reversing a 2018 law that eased capital requirements for smaller banks and said everything is on the table, including refunds for executive compensation.

In the days after regulators took these emergency measures, markets have been exceptionally volatile with liquidity — the ability to get in and out of trades quickly — as U.S. Treasuries have dried up.

The two-year Treasury yield, which is seen as the closest proxy for the Fed’s expected action, has been It has moved more than 0.20% for five consecutive daysthe longest streak in more than 40 years, according to data from Bespoke Investment Group.

Yellen’s appearance on Capitol Hill comes as other regulators begin to lay the groundwork for examining this week’s events. SEC Chairman Gary Gensler told reporters Wednesday afternoon that the SEC is looking into money markets to examine vulnerabilities across the financial system. .

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“We’re looking at the entire money market fund and the broader fund pool to see what they might be exposed to if the entity were in distress or if an entity went into bankruptcy or receivership,” Gensler said.

“Markets this past week, market plumbing — and I distinguish that from comp — market plumbing has been doing reasonably well, but there’s a lot of volatility.”

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