WASHINGTON (AP) 鈥 Treasury Secretary Janet Yellen projected calm on Tuesday after recent regional bank collapses but told a gathering of bankers that additional rescue arrangements 鈥渃ould be warranted鈥 if any new failures at smaller institutions jeopardize financial stability.
Yellen, who made her remarks at the American Bankers Association, said that overall 鈥渢he situation is stabilizing."
"And the U.S. banking system remains sound,鈥 Yellen said, drawing clear differences between recent events and the 2008 financial meltdown, which triggered trillions of dollars of financial losses globally.
鈥淭his is different from 2008,鈥 she said. 鈥2008 was a solvency crisis, rather what we're seeing now is contagious bank runs."
Yellen's remarks come after a series of this month.
, based in Santa Clara, California, failed on March 10 after depositors rushed to withdraw money amid anxiety over the bank鈥檚 health. It was the second-largest bank collapse in U.S. history. over the following weekend and announced that New York-based also had failed. They said that all depositors at both banks, including those holding uninsured funds, those exceeding $250,000, would be protected by federal deposit insurance.
And last week a third bank, San Francisco-based , was fortified by $30 billion in funds raised by 11 of the biggest U.S. banks in an attempt to prevent it from collapsing.
The government is now determined to restore public confidence in the banking system and to prevent any more turmoil. The Justice Department and the Securities and Exchange Commission have launched investigations into the Silicon Valley Bank collapse, and President Joe Biden has to strengthen rules on regional banks and to impose tougher penalties on executives of failed banks.
Yellen said the government鈥檚 intervention was necessary to 鈥減rotect the broader banking system" and more rescue efforts could be necessary, noting that the government is still closely monitoring the banking sector.
鈥淪imilar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,鈥 she said.
When Yellen was asked by the association鈥檚 president, Rob Nichols, what policies need to be adjusted in light of recent events, she said, 鈥淚 don鈥檛 want to speculate at this point on what those adjustments might be. What I鈥檓 focused on is stabilizing our system.鈥
Yellen last week and offered upbeat reassurances to rattled bank depositors and investors that the U.S. banking system 鈥渞emains sound鈥 and Americans 鈥渃an feel confident鈥 about the safety of their deposits.
She will appear in front of congressional panels twice more this week, in the Senate and the House, and will inevitably face more questions about the nature of the bank failures and the government's effort to quell them.
鈥淟et me be clear: The government鈥檚 recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors鈥 savings and the banking system remain safe,鈥 she said.
While details are still being released on the banks' failures, Democratic lawmakers and some economists of portions of a far-reaching 2010 law intended to prevent a future financial crisis were a primary cause of the institutional failures.
Ahead of Yellen's speech, at a panel discussing the state of the banking system, Scott Anderson, president of Zions Bank, said he doesn't think the 2018 rollback is related to the bank failures.
鈥淐ongress needs to be careful," Anderson said. 鈥淭hey need to look at what happened. They need to have a thorough debate and a thorough discussion. But they shouldn鈥檛 jump to any immediate conclusions. I don鈥檛 think these failures show that there鈥檚 any problem within the banking regulations that we have now.鈥
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