Treasury Secretary Janet Yellen will tell bankers on Tuesday that the federal government will backstop deposits at smaller lenders if needed because the Biden administration goals to reassure the general public that the banking system is stable.
“The steps we took weren’t focused on aiding specific banks or classes of banks,” Yellen is anticipated to inform the American Bankers Association on Tuesday.
“Our intervention was needed to guard the broader US banking system,” the Treasury secretary is anticipated to say.
“And similar actions could possibly be warranted if smaller institutions suffer deposit runs that pose the danger of contagion.”
Yellen’s remarks come amid reports that the Biden administration is examining ways to temporarily expand the Federal Deposit Insurance Corp. to cover all bank deposits in hopes of weathering the financial storm and stopping a full-blown crisis.
Treasury Department officials are looking into whether federal regulators have enough emergency authority to insure deposits above the present $250,000 cap on accounts without the consent of Congress, in accordance with the report by Bloomberg News.
Treasury Secretary Janet Yellen is anticipated to inform bankers on Tuesday that the federal government will backstop withdrawals at smaller banks.REUTERS
But some Republicans in Congress have balked at supporting the move.
The Republican House Freedom Caucus said in a press release the Federal Reserve “must unwind” its extraordinary funding facility created on March 12 that enables banks to spice up borrowing from the Federal Reserve to cover deposit outflows.
The Bloomberg report cites individuals with knowledge of the discussions as saying that such a move is just not needed for the time being on condition that federal agencies have already committed to backstopping potential withdrawals.
Nonetheless, Biden administration officials are doing their due diligence in case the situation deteriorates.
“Because of decisive recent actions, the situation has stabilized, deposit flows are improving and Americans can trust in the protection of their deposits,” a Treasury Department spokesperson told Bloomberg.
First Republic Bank, the San Francisco-based regional lender, has received tens of billions in aid from other large banks.Getty Images
Still, the incontrovertible fact that discussions about expanding the FDIC are ongoing is a sign of the extent of concern in Washington that more dominoes could fall following the collapse of Silicon Valley Bank, Signature Bank, the fintech lender Silvergate Bank, and Credit Suisse, the Swiss giant that was bought out for affordable by its rival UBS over the weekend.
Global financial observers are concerned in regards to the stability of First Republic Bank, the San Francisco-based regional lender that received an emergency $30 billion aid package from 11 of the nation’s largest banks last week.
Jamie Dimon, the CEO of JPMorgan Chase, the nation’s largest bank, is reportedly leading discussions with counterparts at other financial institutions over a more comprehensive rescue of First Republic.
Trading in First Republic shares was halted quite a few times on Monday resulting from the volatility.
Concern for the banking system was triggered by the collapse of Silicon Valley Bank earlier this month.AP
The shares, which fell by one other 47% on Monday, have dropped around 88% prior to now two weeks.
First Republic stock showed signs of life in pre-market trading on Tuesday as shares jumped by some 21%.
Other regional bank stocks were also trending upwards just before the opening bell on Tuesday.
Zions Bancorp was up greater than 5.6% in pre-market activity while PacWest surged by greater than 12%.
With Post wires
