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Yellen reassures Senate banking system ‘remains sound’

Senator Lankford presses Yellen on FDIC special exceptions and the bailout of SVB.

Photo by Federalreserve on Flickr / CC BY 1.0

On Thursday, U.S. Treasury Secretary Janet Yellen joined the Senate Finance Committee for a hearing on President Biden’s Fiscal Year (FY) 2024 budget.

Her testimony provided recent updates on the U.S. banking system, one week after the second biggest bank failure in U.S. history. In her speech, she noted that the system “remains sound” and that Americans “can feel confident” about their deposits.

Senator James Lankford questioned Yellen on whether banks in his state of Oklahoma would have to pay extra fees to the Federal Deposit Insurance Corporation (FDIC) to protect deposits at banks with federal backstopping, such as SVB and Signature Bank.

“Oklahoma banks shouldn’t have to bail out Silicon Valley billionaires,” said Lankford.

He also expressed concerns about FDIC exceptions — which he speculated would encourage customers to pull their deposits from smaller banks and move them to larger institutions considering they are more likely to be protected there.

Yellen replied: “That’s certainly not something we are encouraging.” She revealed on CBS last Sunday that a taxpayer-funded bailout, like that in 2008, was not on the table.

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