Bitcoin

Yellen Says US Could Back All Deposits at Smaller Banks if Needed to Prevent Contagion

U.S. Treasury Secretary Janet Yellen says the federal government could guarantee all deposits of smaller banks if they “suffer deposit runs that pose the risk of contagion.” The government recently protected all deposits of Silicon Valley Bank and Signature Bank after they failed.

U.S. Government Ready to Guarantee More Deposits if Needed

U.S. Treasury Secretary Janet Yellen said in a speech to the American Bankers Association Tuesday that the government is ready to provide additional deposit guarantees if the banking crisis worsens.

Following the failures of several major banks, including Silicon Valley Bank and Signature Bank, the government stepped in and guaranteed all deposits of the two failed banks beyond the usual $250,000 Federal Deposit Insurance Corporation (FDIC) coverage limit. The former Federal Reserve chair explained:

The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.

“The situation is stabilizing. And the U.S. banking system remains sound,” Yellen insisted.

Nonetheless, Treasury Department staff are reportedly exploring ways to temporarily expand FDIC insurance coverage to all deposits, Bloomberg reported Monday.

Last week, the Mid-Size Bank Coalition of America asked federal regulators to extend FDIC insurance to all deposits for the next two years. “It is imperative we restore confidence among depositors before another bank fails, avoiding panic and a further crisis,” the group said. In addition, U.S. Congressman Blaine Luetkemeyer has urged the government to temporarily insure every bank deposit in the country to prevent runs on smaller banks.

However, Yellen dismissed last week the idea of the government providing guarantees for all deposits in the event of future bank failures.

Tags in this story
Bank Bailouts, bank failures, bank runs, failed banks, Fed, Federal Reserve, government bailouts, Janet Yellen, runs on small banks, small bank runs, treasury secretary janet yellen, US government

Do you think the government should guarantee all deposits of every bank? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.




Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Read disclaimer

Articles You May Like

Cruise companies pour money into lucrative private resorts
US says ‘Russian influence actors’ are behind viral election video hoax
Shock poll shows Harris leading Trump in Republican-leaning Iowa
Labour needs to make good on its pro-business promise
Adani begins to cut off power supplies to Bangladesh