Treasury Secretary Janet Yellen told lawmakers Wednesday that the Federal Deposit Insurance Corporation (FDIC) wouldn’t be offering “blanket insurance” for all U.S. bank deposits in the wake of the collapse and bailout of depositors at two major financial institutions.
Instead, the FDIC will only be safeguarding deposits at banks whose failures are designated as systemic risks in order to prevent bank runs from spreading to other financial institutions, Yellen told lawmakers during a Senate Appropriations Committee hearing. Federal regulators rescued depositors at Silicon Valley Bank and Signature Bank following their collapses, citing systemic risk.
Republican Sen. Bill Hagerty of Tennessee asked Yellen if insuring every deposit over $250,000 at every FDIC-insured bank would require congressional approval. (RELATED: Janet Yellen Says More Bank Bailouts Could Be On The Horizon)
“I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits,” Yellen responded.
Rather, the FDIC will evaluate institutions on a case-by-case basis, Yellen said, echoing the same policy stance she espoused on Tuesday when she said there could be bailouts for more banks, but only if their failures may cause a contagion.
WASHINGTON, DC – MARCH 22: U.S. Secretary of the Treasury Janet Yellen testifies before the Senate Appropriations Subcommittee on Financial Services March 22, 2023 in Washington, DC. The committee heard testimony to “examine proposed budget estimates and justification for fiscal year 2024 for the Department of the Treasury.” (Photo by Win McNamee/Getty Images)
Despite Yellen’s remarks, U.S. Treasury officials are reportedly studying methods to temporarily expand FDIC coverage, following a request from the Mid-Size Bank Coalition of America (MBCA). MBCA consists of as many as 110 banks with assets as high as $100 billion and the group asked regulators to cover all deposits for the next two years, arguing it is necessary to stave off a potential financial crisis, Bloomberg reported.
Yellen amassed over $7 million in speaking fees from dozens of companies in the two years before she was confirmed as Treasury secretary. These included Goldman Sachs, Bank of America, Citi, Credit Suisse, UBS, Charles Schwab and many more, according to Yellen’s public financial disclosure report.
As part of the CARES Act, Congress temporarily authorized the FDIC to remove the $250,000 cap on insured deposits to stop potential bank runs during the COVID-19 pandemic.
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