Yellen, caught between financial markets and US Congress, pleases neither
By Heather Timmons and David Lawder
WASHINGTON, March 23 (Reuters) -Treasury Secretary Janet Yellen will sit for her third congressional hearing in a week on Thursday, where, once again, she's likely to be pressed on whether the U.S. government will guarantee all of the country's $19.2 trillion in bank deposits.
It's something that the Treasury and regulators did in the depths of the 2008 global financial crisis, but regulatory reforms in 2010 required a streamlined approval from Congress.
After a swift governmentpledge to guarantee uninsured deposits in failed Silicon Valley Bank SIVB.O and Signature Bank SBNY.O when they were deemed to threaten widespread bank runs this month, bankers and market players have been obsessed with the question of whether all U.S. bank deposits are now effectively backstopped by Washington.
Bankers have argued that a universal guarantee is needed to keep deposits from fleeing for perceived safety to large banks that are viewed as "too big to fail" until the current banking crisis eases.
Yellen is the face of the U.S. government on the issue, and her public comments have pushed markets on a roller coaster ride, with seemingly conflicting answers.
Meanwhile, hardline Republicans oppose any increase in the current $250,000 Federal Deposit Insurance Corp insurance limit.
Without authorization from Congress, much of what Yellen can do to calm markets and safeguard deposits mimics the contours of the actions on SVB and Signature Bank - case-by-case assessments of whether a bank failure would cause spillovers.
Yellen explained to the U.S. Senate on March 16 that there would be no guarantee for deposits in banks not deemed a systemic threat, spooking community banks. But her remarks at a bank conference on Tuesday that similar actions to the SVB guarantee "could be warranted if smaller institutions suffer deposit runs," cheered them.
On Wednesday, Republican Senator Bill Hagerty asked Yellen about reports that U.S. officials considered options to safeguard deposits without the approval of Congress and asked: "Madam Secretary, does ensuring every deposit at every FDIC insured bank in the nation over $250,000 require congressional approval?"
Yellen said she was not considering such a move and was reviewing banking risks on a case-by-case basis, adding: "I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits."
The remarks, coming after the Federal Reserve raised interest rates by one quarter of a percentage point, contributed to another fall in the shares of struggling First Republic Bank FRC.N, analysts said.
MARKET VERSUS POLITICAL REALITIES
The comments drew quick criticism from investors, including Bill Ackman, who has relentlessly warned of dire consequences to small U.S. banks if the government doesn't cough up a bigger guarantee, was quick to criticize Yellen.
"I would be surprised if deposit outflows don't accelerate effective immediately. A temporary systemwide deposit guarantee is needed to stop the bleeding," Ackman said on Twitter after Yellen's testimony to a Senate committee on Wednesday.
But those market demands fail to take into account the political reality that the Biden administration faces, regulatory experts say.
"This can't be done by executive order," said Andrew Levin, a Dartmouth College economics professor and former Fed official. He added that going through Congress is "politically infeasible."
Setting aside Congress's authority, the issue is a non-starter in most U.S. government offices, sources say. The idea was mentioned in an official brainstorming session after SVB's March 10 collapse, but sources told Reuters it was never under serious consideration.
Yellen is due to testify later on Thursday before the U.S. House of Representatives Appropriations Subcommittee on Financial Services and General Government.
Reporting by Heather Timmons and David Lawder; Writing by Heather Timmons; Editing by Paul Simao
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.