Yellen to tell Congress US banking system 'remains sound'

Yellen to tell Congress US banking system 'remains sound'

Yellen to tell Congress US banking system 'remains sound'

WASHINGTON — A week after the second-largest bank collapse in U.S. history, Treasury Secretary Janet Yellen is set to tell the Senate Finance Committee that the nation's banking system “remains sound” and Americans "can feel confident” about their deposits.

Yellen will be the first Biden administration official to face lawmakers over the decision to protect uninsured money at two failed regional banks, a move that some observers have criticized as a bank “bailout.”

“The government took decisive and forceful actions to strengthen public confidence” in the U.S. banking system, Yellen says in prepared testimony released before her appearance. “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."

In less than a week, Silicon Valley Bank, based in Santa Clara, California, failed after depositors rushed to withdraw money amid anxiety over the bank’s health. Then, regulators convened over the weekend and announced that New York-based Signature Bank also failed. They ensured all depositors, including those holding uninsured funds exceeding $250,000, were protected by federal deposit insurance.

The Justice Department and the Securities and Exchange Commission have since launched investigations into the Silicon Valley Bank collapse.

Thursday's hearing is meant to address President Joe Biden's budget proposal, but it comes after the sudden collapse of the nation’s 16th-biggest bank and go-to financial institution for tech entrepreneurs. While Yellen will be prepared to talk about spending proposals, the hearing will inevitably turn to the government's decision-making process to intervene in the bank failure.

Lawmakers will likely question whether the money committed to make depositors whole is a bailout, the degree to which taxpayers will be on the hook for the intervention and the possibility of new regulation impacting the banking system.