1 of 4 | Treasury Secretary Janet Yellen expressed confidence in the nation's banking system in remarks prepared for a Thursday budget hearing before the Senate Finance Committee. Photo by Bonnie Cash/UPI | License Photo
March 16 (UPI) -- Treasury Secretary Janet Yellen expressed confidence in the nation's banking system Thursday in remarks to the Senate Finance Committee following last week's collapse of two banks that sent shockwaves through Wall Street.
Yellen offered assurances that billions in savings and deposits at Silicon Valley Bank and Signature Bank were safe from any loss, as the government has agreed to step in and bail out depositors.
"I can reassure the members of the committee that our banking system remains sound and that Americans can feel confident that their deposits will be there when they need them," Yellen said. "This week's actions demonstrate our resolute commitment to ensure that depositors' savings remain safe."
Yellen also touted a Federal Reserve plan that will set up a new federal lending apparatus to help the banks pay off depositors.
In the days following the collapses, federal regulators took steps to reinforce the banking sector with emergency funds to help those impacted.
Last weekend, the Treasury Department and the Federal Deposit Insurance Corp. announced all deposits would be fully repaid, while the Federal Reserve said it would loan the banks money to pay their account holders, but hold on to Treasury securities as collateral even if those assets had diminished in value.
Yellen has emphasized that the loans were only intended to shore up the banking system amid surging volatility in global banking and "help financial institutions meet the needs of all of their depositors."
Critics have questioned how federal regulators didn't notice trouble on the horizon at Silicon Valley Bank after the company's profits took off due to huge deposits from giants in the tech industry.
Rumblings also were emerging on Capitol Hill that the Biden administration was trying to bail out wealthy investors, although earlier in the week Yellen said the government would not step in this time around to rescue banks as it did during the 2008 financial crisis.
Yellen said the current plan ensures bank customers will continue to have access to their money to pay bills and employees, while only shareholders and investors would be exposed to losses.
"Importantly, no taxpayer money is being used or put at risk with this action," Yellen said, noting that emergency funds to repay depositors were taken from federal bank fees.
Ripples from the two U.S. bank collapses were being felt around the world, with Swiss bank Credit Suisse also facing collapse as investors grew increasingly nervous over the situation.
Yellen's testimony comes as U.S. lawmakers are debating the federal budget to avoid a potential default on the national debt. Tension also has been building with Congress over President Joe Biden's strategy to raise the debt ceiling.
She said the administration would continue to prioritize bringing down inflation.
"Our Administration will continue to build on the actions we've taken to expand supply and provide cost relief in areas like energy and healthcare," Yellen said.
Yellen also urged additional spending on childcare programs, like restoring the Child Tax Credit and Earned Income Tax Credit expansions that were enacted in 2021, but have since expired.
Combined with tax increases on America's highest earners, Yellen said that the Biden administration's budget would reduce the deficit by nearly $3 trillion over the next 10 years.