WASHINGTON - United States Treasury Secretary Janet Yellen reiterated on Thursday that she was prepared to take further action to ensure that Americans’ bank deposits stay safe amid turmoil in the banking system.
Silicon Valley Bank (SVB) was taken over by federal regulators on March 10, followed days later by Signature Bank.
Multiple federal agencies, including the US Department of Justice and the Securities and Exchange Commission, are probing SVB.
“We have used important tools to act quickly to prevent contagion. And they are tools we could use again,” Dr Yellen said in written testimony before a House Appropriations subcommittee.
“The strong actions we have taken ensure that Americans’ deposits are safe. Certainly, we would be prepared to take additional actions if warranted.”
The statement conveyed a different message from her remarks a day earlier, when she told senators that the Treasury was not considering any plans to insure all US bank deposits without congressional approval.
Global banking markets have been skittish and investors remain fearful of wider economic repercussions.
US bank stocks slid again on Thursday, pushing the S&P 500 banks index down to its lowest close since November 2020.
Given that control of Congress is divided, with Republicans holding a majority in the House of Representatives and President Joe Biden’s fellow Democrats leading the Senate, any new legislation in the light of the banking crisis would require bipartisan support.
House Financial Services Committee chairman Patrick McHenry, a Republican, said on Wednesday that it was too early to tell if new legislation was necessary after the failures of the two banks.
Mr Biden said last week that the banking crisis had calmed down, and promised Americans that their deposits would be safe.
On the broader state of the US economy, Dr Yellen said the labour market was “extremely tight”, and that this was contributing to inflation.
But she added that supply chain pressures and shipping costs were coming down and were eventually likely to bring down inflation.
Separately, on the issue of the debt ceiling, she said a US debt default would undermine the dollar’s reserve currency status and that a failure to raise the debt ceiling would lead to a recession or worse.
Republicans in the US House of Representatives are working on a “term sheet” of conditions they would want Democrats to agree to in exchange for voting to raise the federal government’s US$31.4 trillion (S$41.7 trillion) debt ceiling later in 2023, House Budget Committee chairman Jodey Arrington said on Thursday.
Dr Yellen also told lawmakers that Russia and China have the motivation to try to develop an alternative to the US dollar, but it would be “tremendously difficult” for them to do so.
“I certainly want to see the dollar remain as the world’s reserve currency and there is motivation that Russia and China have to try to develop another system that avoids the use of the dollar,” she said. REUTERS
