US economic method is sound, Yellen tells lawmakers
Treasury Secretary Janet Yellen on Thursday told a Senate panel that the U.S. economic method is on strong footing following the second- and third-biggest bank collapses in the nation’s history.
Her remarks come following a bank run on Silicon Valley Bank (SVB) and Signature Bank forced federal regulators to close the banks and defend all deposits in an work to preserve public self-assurance in the U.S. banking method.
“I can reassure the members of the committee that our banking method is sound, and that Americans can really feel confident that their deposits will be there when they have to have them,” Yellen told the Senate Finance Committee. “This week’s actions demonstrate our resolute commitment to guarantee that our economic method remains sturdy and the depositors’ savings stay protected.”
Regulators ensured that the banks’ customers got their deposits back making use of a fund paid for by charges on banks. The Fed, meanwhile, launched an emergency lending system to enable banks climate a surge in withdrawals. Yellen noted Thursday that the unprecedented action did not defend shareholders.
SVB faced huge unrealized losses on its extended-term treasury bond investments due to the Federal Reserve’s interest price hikes. The bank’s tech business and venture capital customers rushed to withdraw their cash when it became clear SVB faced the threat of insolvency.
Yellen tells Congress US banking method ‘remains sound’
Goldman Sachs sees 35 % possibility of recession in subsequent year
When pressed by Sen. Mike Crapo (R-Idaho), the committee’s ranking member, Yellen acknowledged that interest price hikes forced SVB to sell huge amounts of assets at a loss, but didn’t say that the U.S. economic method faces a broader liquidity crisis.
The international economy is staring down warning indicators following the bank failures. Swiss investment bank Credit Suisse faces liquidity troubles, even though Moody’s is weighing downgrading the credit rating of six regional U.S. banks.
Brief-term treasury yields plummeted earlier this week as investors flocked to safer assets. The ICE BofA MOVE index, which measures bond marketplace volatility, has risen to its highest level due to the fact the 2008 economic crisis.
Copyright 2023 Nexstar Media Inc. All rights reserved. This material could not be published, broadcast, rewritten, or redistributed.