Yellen Reassures Congress that U.S. Banking System Remains “Sound” After Week of Market Turmoil
On March 16, 2023, Treasury Secretary Janet Yellen sought to reassure Congress that the U.S. banking system remains “sound” after a week of market turbulence. Yellen testified before the Senate Finance Committee, praising the government's “decisive and forceful actions to strengthen public confidence in our banking system” in the wake of Silicon Valley Bank's failure and subsequent takeover by the FDIC. This happened nearly one week ago, and it was meant to bolster public confidence in the banking system. She added that no taxpayer money was being used or put at risk by the action and deposit protection is provided by the Deposit Insurance Fund, funded by fees on banks.
Senator Mike Crapo expressed concern about the precedent of guaranteeing all deposits and the market expectation moving forward. Yellen responded that the government’s response to the collapse of Silicon Valley Bank and Signature Bank last weekend were “decisive and forceful actions to strengthen public confidence in our banking system to strengthen public confidence in our banking system” and that no taxpayer money was being used or put at risk with this action.
Yellen warned lawmakers that defaulting on US debt would trigger an economic and financial catastrophe. Senator Ron Wyden acknowledged the events of the last week in the banking sector have left Americans concerned, and said it underscores the need for Congress to raise or suspend the debt limit. Yellen urged all members of Congress to come together to address the debt limit without conditions and without waiting until the last minute.
Investigations have been opened by the Justice Department and the Securities and Exchange Commission into the Silicon Valley Bank's collapse. Yellen said on CBS' “Face the Nation” last Sunday that a bailout was not on the table, stating, “we’re not going to do that again.”
Yellen testified on President Biden’s 2024 budget proposal which calls for $4.7 trillion in new taxes and $6.9 trillion in new spending during a staggering debt crisis. Biden also proposed raising the corporate tax rate from 21% to 28% and pitching a 25% minimum tax on the wealthiest people in America. He proposed raising the individual tax rate to 39.6% from 37% and hiking the take rate for top income earners on Medicare to 5% from 3.8%.
Amid upheaval in worldwide markets and concerns about financial security following the sudden failure of three regional US banks as well as issues with Credit Suisse Group AG, a hearing has been scheduled.
0. “Yellen Seeks to Reassure Congress on Banks Amid Oversight Angst” Yahoo Entertainment, 16 Mar. 2023, https://www.yahoo.com/entertainment/yellen-seeks-reassure-congress-banks-110000036.html
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2. “Yellen says U.S. banking system is ‘stable' and deposits ‘remain safe' following failure of SVB, Signature” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/svb-signature-bank-failures-yellen-says-us-banking-system-is-stable-and-deposits-remain-safe.html
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