(Daily360.com) – Treasury Secretary Janet Yellen was testifying before the Senate Finance Committee and things got a bit heated. Of particular note was the exchange she had with Oklahoma Senator James Lankford. He was making inquiries based on the Treasury’s decision to guarantee all deposits made at the now-collapsed Silicon Valley Bank (SVB). The Biden Administration announced through the Bank Term Funding Program (BTFP), all monies will be paid out from the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC). Previously, only amounts up to $250,000 were covered, this measure will put enormous strains on the FDIC system.
Lankford asked if every bank deposit in his home state of Oklahoma was now fully guaranteed by the government regardless of the amount. He also asked if foreign investors like the Chinese are covered under this new plan. Yellen replied by saying these things are determined by the FDIC and the Fed board where a super majority is needed. Lankford pressed Yellen for a reason why large depositors would not now opt to take their business from smaller community banks to big banks where there are newly minted full guarantees. He cited past bank mergers and said these actions will likely hasten more. Yellen’s reply was a paltry statement about how they’re not “encouraging” such actions.
Lankford adamantly responded to Yellen by saying that is “happening right now!” He pointed to the Signature Bank collapse, citing how that bank barely qualified for the necessary illustrated government standard. Yellen went back to the talking points about not wanting to trigger a “run” on the banks by customers and said there was a “contagion” risk. She said the Biden Administration believes their actions will lead customers to believe the banking system is secure. As for the question of foreign investors, Yellen said that if their money is in the bank she “supposes” the U.S. government will cover them as well.
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