Treasury Secretary Janet Yellen said Tuesday that the government is poised to take further actions to shore up depositors should the need arise, and she defended regulators' interventions into Silicon Valley Bank and Signature Bank as necessary to stabilize the banking sector.
Speaking at the American Bankers Association annual summit in Washington, Yellen said the liquidity crunch at Silicon Valley Bank in California and Signature Bank in New York required "a swift response" and should reassure markets that regulators will do what it takes to ensure the safety of the banking system.
"The situation demanded a swift response. In the days that followed, the federal government delivered just that: decisive and forceful actions to strengthen public confidence in the U.S. banking system and protect the American economy," Yellen said in her prepared remarks. "Let me be clear: The government's recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors' savings and the banking system remain safe."
Silicon Valley and Signature banks were
Yellen said the deteriorating situation at Silicon Valley Bank and Signature "could have had significant impacts on the broader banking system and the economy" and thus warranted swift and decisive action by regulators to quell markets and make depositors whole. The intervention was not intended to protect "specific banks or classes of banks," but rather the banking system generally and the FDIC's Deposit Insurance Fund. Regulators would do the same thing again if a similar set of circumstances were to arise, she said.
"Similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion," Yellen said. "I believe that our actions reduced the risk of further bank failures that would have imposed losses on the Deposit Insurance Fund, which is paid for through fees on insured banks."
Yellen's comments appeared to walk back
"Large banks play an important role in our economy, but so do small and midsized banks," Yellen said. "These banks are heavily engaged in traditional banking services that provide vital credit and financial support to families and small businesses. They also increase competition in the banking sector, and often have specialized knowledge and expertise in the communities they invest in."
Shares in First Republic Bank in San Francisco — which has been shaky since the failure of Silicon Valley and Signature banks, and which received $30 billion of deposits from other banks last week — rose on Tuesday morning ahead of Yellen's remarks,
