Fed Will Stabilize US Financial Economy, Assures Treasury Secretary

  • The US Treasury Secretary stated that the depositors of the two fallen banks would be considered by the Fed.
  • Yellen added that the Fed would not consider all the banks equally.

Janet Yellen, the US Secretary of the Treasury, confirmed on Thursday that the Federal government would sustain the financial economy of the United States. The Secretary defended that the Fed has been directed towards protecting depositors at the recently shuttered banking giants, thereby preventing the current liquidity crunch and stabilizing the US financial system.

Notably, at the Senate Finance Committee, Yellen assured that the US citizens could be confident about their deposits, claiming:

Our banking system remains sound and Americans can feel confident that their deposits will be there when they need them.

However, the secretary added that not all the depositors would be granted the relaxations under the FDIC insurance limits of $250,000 per account, unlike the customers of the fallen Silvergate Bank and Signature Bank.

Adding to her point, Yellen stressed that a bank would be considered only when a majority of the members of the Federal Reserve along with the President and the Secretary of the Treasury, observe that the “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences”.

Previously, on Sunday, the Federal Reserve Board announced its plan to make additional funding to eligible institutions, to support the US banking system, in addition to the traditional FDIC insurance.

Additionally, the Fed has bestowed the institutions with multiple programs such as the one-year-long loaning schemes and loosened borrowing guidelines for short-term funding, creating a more flexible stage for troubled investors and institutions.

Yellen, while commenting on the overall support from the Fed stated that its actions would help the depositors meet their needs, quoting:

This will help financial institutions meet the needs of all of their depositors. This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe.

Further, while clarifying the investors’ queries, Yellen reiterated that the present contributions from the Federal Reserve would be temporary and couldn’t be expected for the succeeding bank failures.

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