Watch Irate Congressman Pressure Failed Bank Execs To Own Up To Debacle
'You're the only one to man up'
Following recent bank failures, Treasury Sec. Janet Yellen assures 'our banking system is sound'
In the wake of recent bank failures, Treasury Secretary Janet Yellen claimed during remarks on Thursday that the "banking system is sound."
"I can reassure the members of the committee that our banking system is sound and that Americans can feel confident that their deposits will be there when they need them," Yellen said while speaking before the Senate Finance Committee. "This week's actions demonstrate our resolute commitment to ensure that our financial system remains strong and that depositors' savings remain safe."
Silicon Valley Bank and Signature Bank both recently collapsed, sparking fears of possible contagion that could wreak havoc throughout the financial system — depositors at the banks are being bailed out and will not lose the funds they held at the institutions.
Republican Rep. Blaine Luetkemeyer of Missouri has suggested that the government should temporarily insure all bank deposits, according to Politico.
"If you don’t do this, there's going to be a run on your smaller banks," Luetkemeyer said, according to the outlet. "Everyone's going to take their money out and run to the JPMorgan’s and these too-big-to-fail banks, and they're going to get bigger and everybody else is going to get smaller and weaker, and it's going really be bad for our system."
Yellen also said on Thursday that she does not think deficit spending is one of the main reasons for inflation.
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Prior to Jerome Powell's tenure as Fed chair, Yellen served as chair of the board of governors of the Federal Reserve System for a four-year period that concluded in early February 2018. She was the first woman to serve as Fed chair, and she is also the first woman to serve as Treasury secretary.
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Former FDIC chairman makes ominous prediction about banks after sudden collapse of Silicon Valley Bank, Signature Bank
William Isaac, former chairman of the Federal Deposit Insurance Corporation, predicted Wednesday that more banks will fail after the collapse of Silicon Valley Bank and Signature Bank.
Speaking on Fox News, Isaac said the government's "out-of-control" fiscal policies will cause more banks to fail.
"I do think there’s probably going to be more failures along the way," Isaac, who served in the Raegan administration, told host Neil Cavuto.
"The problem we have is the same one that we had back in 1970s when the government was out of control with its fiscal policies, its monetary policies, inflation set in and banks were just not ready for that," he explained. "We wound up losing some 5,000 banks and thrifts during that period."
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Fortunately, Isaac said the economic pinch will not trigger as many failures this time around — but only because there are fewer today that can fail.
"We won’t lose anywhere near that number this time because we don't have that many," he said. "We only have about 4,500 banks today. I’m not concerned a lot about contagion. I believe the government knows what it's doing. It's willing to take actions. It knows how to take those actions. I don't think this is the last of the failures. I think we've got some cleanup to do.
"Most importantly: The government's got to get its act under control," Isaac added. "The government has had irresponsible fiscal policies for 20 years and pretty irresponsible Fed policy."
Of course, Isaac said the government can mitigate damages if it reverses irresponsible policies.
Meanwhile, while the government refuses to say it has promised a bailout despite saying the deposits at SVB and Signature Bank are guaranteed beyond the FDIC's $250,000 maximum, Isaac believes the government is "clearly" promising a bailout.
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Democratic senator pokes holes in narrative blaming Trump for collapsed banks: 'Regulators didn't get it right'
Sen. Bob Menendez (D-N.J.) undermined on Wednesday the narrative that blames former President Donald Trump for the collapse of Silicon Valley Bank and Signature Bank.
Democrats, including President Joe Biden, have laid blame at the feet of the Trump administration. They point to a 2018 law that Trump signed to roll back regulations on the financial services industry that had been enacted by the Dodd-Frank Act in 2010.
"During the Obama-Biden administration, we put in place tough requirements ... to make sure the crisis we saw in 2008 would not happen again. Unfortunately, the last administration rolled back some of these requirements," Biden said on Monday.
What did Menendez say?
During an interview on MSNBC, the senior Democratic senator said he opposed the 2018 regulatory roll back and still opposes it.
"I voted against the repeal in 2018 that gave regulators greater oversight over banks like these two that failed," Menendez said. "I thought it was taking away, you know, critical elements of prudential standards and risks that should have been reviewed by the regulators."
But, more importantly, he highlighted the role that federal regulators played in the collapse of SVB and Signature Bank.
"I also have to question the regulators. You know, they still had a responsibility of oversight over these banks at the Federal Reserve," he pointed out. "Was the Federal Reserve not looking at their balance sheets? It seems to me that upon looking at them, there were warning signs."
"And what was the Federal Reserve, who is raising interest rates, thinking about as it relates to banks like these and maybe others that may be affected by their rate hikes and what that means to their depositors? So, there is [sic] a lot of questions to be raised here, but I think the regulators didn't get it right."
Menendez Joins José Díaz-Balart to Discuss Mexico-US Relations, Silicon Valley Bank, and more www.youtube.com
Still, Menendez believes those who supported the regulatory roll backs probably regret that decision today.
Anything else?
Even if the 2018 roll backs were directly responsible for what happened, it would be dishonest to blame Trump solely. That is because the roll back was bipartisan; 17 Senate Democrats and 33 House Democrats voted for it.
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Government should temporarily back all bank deposits, House Republican says
Republican Rep. Blaine Luetkemeyer of Missouri believes that the U.S. government should temporarily offer blanket insurance for all bank deposits in a bid to prevent massive flows of funds from smaller banks to larger institutions amid widespread panic surrounding the financial system.
"If you don’t do this, there's going to be a run on your smaller banks," Luetkemeyer said, according to Politico, "Everyone's going to take their money out and run to the JPMorgan’s and these too-big-to-fail banks, and they're going to get bigger and everybody else is going to get smaller and weaker, and it's going really be bad for our system."
Silicon Valley Bank and Signature Bank both collapsed recently, but while depositors who held funds at those institutions are being bailed out and will therefore not incur losses, the bank failures have sparked fears of contagion and further financial havoc.
"The thought process here is that this is a contagion that could be spread across the entire banking system if it's not contained and if people don't stop and and be calm about their assessment of the situation," the lawmaker said, according to the outlet. "This is a Chicken Little situation. You know, the sky is falling. Everybody runs around like that, the whole thing's going to implode."
Luetkemeyer, who has served in the U.S. House of Representatives for over a decade, suggested taking action by declaring that "for another 12 months here or six months, we're going to guarantee you every single deposit in this country and every bank until we get this interest rate situation resolved and these banks get back on solid footing." Politico reported that the lawmaker later altered his stance on the potential timeframe, with a spokesperson indicating that the guarantee could last "perhaps 30 to 60 days."
According to the outlet, the lawmaker claimed that "the system is sound" and "in better shape than it’s been in probably 20 years," though he also said that "we do have a few problems in it that need to be worked out."
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