WASHINGTON — Treasury Secretary Janet L. Yellen said on Thursday that the nation’s banking system was sound and that the Biden administration was committed to ensuring that American bank deposits were safe.
Ms. Yellen’s comments, in prepared testimony ahead of a Senate Finance Committee hearing, came days after the Treasury secretary and other federal regulators moved to shore up the financial system and contain fallout from the collapse of Silicon Valley Bank.
On Sunday, the Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation announced that they would make sure that all depositors at Silicon Valley Bank and Signature Bank, which regulators also seized, were repaid in full.
In an attempt to forestall a broader liquidity crisis, the Fed also announced on Sunday that it would offer loans to banks and accept their Treasury securities and other holdings as collateral, even if rising interest rates had impaired the value of those assets.
“I can reassure the members of the committee that our banking system remains sound and that Americans can feel confident that their deposits will be there when they need them,” Ms. Yellen said in prepared remarks. “This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe.”
The bank’s failure has prompted questions about why federal regulators failed to spot risks at Silicon Valley Bank, which grew rapidly and took on a large number of depositors from the tech industry. And the government’s rescue has fueled accusations that the Biden administration is bailing out rich investors.
Ms. Yellen said the rescue was intended to make sure that bank customers could access their money, pay bills and make payroll. She noted that shareholders and debt holders were not protected from losses.
“Importantly, no taxpayer money is being used or put at risk with this action,” Ms. Yellen said, adding that the money being used to repay depositors came from fees imposed on banks.
The Treasury secretary described the Federal Reserve’s lending facility as an effort to provide additional support to the banking system and “help financial institutions meet the needs of all of their depositors.”
Officials continue to worry about volatility in the banking sector around the world. On Wednesday, the large Swiss bank Credit Suisse was fighting for its life amid investors’ concern that it could run out of money.
Treasury officials were monitoring the situation on Wednesday in coordination with their global counterparts.
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