Janet Yellen is once more on thin ice contained in the Biden Administration over her bungling of the banking crisis that keeps roiling markets, The Post has learned.
The query is when will Sleepy Joe & Co. finally act? They should put Yellen out of her misery and end ours by handing her job to someone who knows easy methods to take care of the very real possibility of banks failing on a scale not seen for the reason that 2008 financial crisis and a possible deep recession.
As we’ve reported, the political types within the White House — the people who craft messaging and provides input on cabinet selections — have been increasingly wary of Yellen’s ability to do the job despite her expansive resume and years running the Fed, individuals with direct knowledge tell the Post.
They grew sour over her bungled response to inflation (recall how she said it was transitory because it was exploding). It’s why they floated possible replacements last yr, including Commerce Secretary Gina Raimondo, and Brian Moynihan, the CEO of Bank of America. Each are seen as policy heavyweights. Unlike Yellen, they’ve real-world business experience (Yellen’s been in academia and government throughout her profession).
Yet she survived that try and get her removed because her ultimate boss, the president, didn’t want to fireplace a lady in such a high-profile post, these people say. Sleepy Joe may not have much selection now given the growing severity of what she and the country are facing: The collapse of huge regional banks Silicon Valley and Signature banks.
Treasury Secretary Janet Yellen testifying on Capitol Hill Thursday.AP
First Republic, with greater than $200 billion in assets, is on the precipice. Credit Suisse nearly imploded and was forced to merge with its Swiss neighbor, UBS. On Friday, investors began freaking out about one other European banking giant, Deutsche Bank and commenced predicting its failure.
Follow The Post’s coverage of Silicon Valley Bank’s collapse
Yellen’s response to this has been bewildering from a messaging standpoint. White House advisers are pointing to her multiple flip-flops on whether the federal government will back up all deposits in a failed bank — even those well past the FDIC insurance threshold of $250,000. I get it, she doesn’t want people to tug money out of regional banks at just the hint of weakness, but what she is saying lacks credulity. Will the federal government or the underfunded FDIC insurance fund really cover a deposit of greater than 1,000,000 dollars?
One other criticism: Her slow-walking the possible severity of weakness within the plumbing of banks as failures begin to pile up. She says the system is secure and secure, but it surely’s obviously not. Years of historical and super-low rates of interest distort asset values and risk-taking, and banks can’t be immune from the results.
“On one hand they’re sort of stuck along with her; it will be bad to do away with a Treasury Secretary during a banking crisis,” said one among my sources, who works at a big DC-based think-tank and has heard the griping firsthand. “Then again, they know they don’t have anyone good to be their face when it comes to a response.”
President Biden didn’t want to fireplace a lady in such a high-profile post, sources say.AFP via Getty Images
Yellen clearly has heard the criticism. On Friday, she called an emergency meeting of top bank regulators to debate the expanding crisis. The agenda will likely include not only past bank collapses, however the impasse over First Republic’s fate – bankers are attempting, to this point in vain, to save lots of the institution from being the most recent domino to fall within the regional bank mess.
Then there’s the scary implosion of Deutsche Bank, which given its size, carries a big systemic risk to the complete economic system, including big banks like JPMorgan and Bank of America that trade with the German behemoth.
I assume you possibly can say Yellen’s sudden urgency is healthier late than never. But check your calendar: We’re happening week three of a fast-moving banking contagion that would spark a big recession if banks collapse en masse and lending dries up, so whatever she’s doing remains to be far too late.
Even people contained in the White House are waking as much as that sad reality.
