Live: Treasury Secretary Janet Yellen testifies before the Senate Finance Committee

Washington — Treasury Secretary Janet Yellen on Thursday sought to allay congressional concerns. collapse of two banks Despite consumer unrest over the past few days and the state of the financial services sector, the country’s banking system remains strong.

In testimony before the Senate Finance Committee, Yellen noted the government’s “decisive and strong actions to strengthen public confidence in our banking system” after the Silicon Valley bank. suddenly failed about a week ago and accepted by the Federal Deposit Insurance Corporation (FDIC).

“I can assure the committee that our banking system is sound and Americans can feel confident that their deposits will be there when they need them,” he said. “This week’s actions demonstrate our strong commitment to ensure that depositor savings remain strong and depositor savings safe.”

Federal regulators took action in response to the failure of the California-based Silicon Valley bank make a plan strengthen public confidence in the strength of the financial system and limit spillover effects. The Biden administration announced On Sunday, an urgent effort was made to strengthen the banking system, including ensuring that depositors with accounts at a Silicon Valley bank have access to all their money.

In her opening remarks, Yellen emphasized the Treasury Department’s work with the Federal Reserve and the FDIC to protect all depositors and reiterated that taxpayers. would not escape Silicon Valley Bank Investors.

“Customers were able to access all the money in their deposit accounts, so they could make payroll and pay their bills,” Yellen said, noting that investors in the banks were not able to succeed either. “The government does not protect shareholders and debtors. Most importantly, taxpayer money is not used or put at risk by doing so. Deposit protection is provided by the Deposit Guarantee Fund, which is funded by fees charged to banks.”

The plan, developed by senior bank officials in the Yellen and Biden administrations, also included a new lending facility created by the Federal Reserve, called the Bank’s Term Funding Program. Yellen told senators the program would “help financial institutions meet the needs of all depositors.”

Still, the committee’s chairman, Sen. Ron Wyden, acknowledged that the events of the past week in the banking sector have worried Americans, stressing the need for Congress to raise or stop the debt ceiling.

“The nerves are frayed right now,” the Oregon Democrat said in his opening remarks. “One of the most important steps Congress can take now is to ensure that the full faith and credit of the United States is not in question. That means paying the bills raised by presidents of both parties and taking default off the table.”

The Silicon Valley bank, which was 40 years old and was the 16th largest bank in the US, mainly served the technology industry and was used by many startups and venture capital firms. It is the largest financial institution to fail since Washington Mutual in 2008 at the height of the financial crisis.

In announcing their own emergency measures in response to the closing of the Silicon Valley bank, federal banking officials on Sunday also identified a second institution, Signature Bank in New York, by state regulators.

Yellen said the Silicon Valley bank had to close last week after investors rushed to withdraw money, citing concerns about its balance sheet.

“It was heavily dependent on uninsured deposits and there was massive withdrawal of deposits which led to liquidity problems,” he said.

Within days, the circumstances that led to the failure of the two banks are expected to be in focus before Yellen’s Treasury Board, as well as inflation and the debt ceiling.

Congressional Budget Office assessments The U.S. could be at risk of defaulting on its debt in July if Congress does not lift or freeze the debt limit, setting up a major showdown between President Biden and the Republican majority in the House of Representatives.

While the White House is pushing Congress to approve the debt limit increase without strings attached, House Speaker Kevin McCarthy and GOP lawmakers have said any deal must be paired with federal spending cuts.

Yellen told senators that Mr. Biden was willing to discuss government spending limits, but stressed that talks on spending cuts must be separate from the fight over the debt limit.

“The debt ceiling simply needs to be raised, and threatening the full faith and credit of the United States and threatening economic and financial disaster is not an acceptable requirement,” he said.

On inflation, Yellen said in her opening remarks that there has been some moderation in core inflation, but “more work needs to be done.” Although inflation cooled in February remains stubbornly high, at the level of 6%. The Fed will have to decide whether to continue raising interest rates to try to slow inflation, or ease as pressures on the banking industry increase.

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