![]() James Lankford of Oklahoma pressed Yellen about how widely the uninsured deposit backstops will apply across the banking industry. They are going to move billions of dollars from small banks to large banks in the days ahead, and that is going to cause a tsunami of stress on those small banks.ĭoes Janet Yellen even understand what she just did?ĭuring congressional testimony on Friday, Senator James Lankford asked Yellen the sort of question that many of us have been hoping that someone would ask … Why would anyone keep more than $250,000 in a small bank at this point when there is a very real risk of losing all of the uninsured money if the bank suddenly fails? In other words, Janet Yellen just poured lighter fluid on every small bank in America. So that means that depositors at big banks are likely to be protected and that depositors at small banks are much less likely to be protected. She just admitted that depositors at a failed bank will only be protected if officials determine that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences”. Treasury Secretary Janet Yellen is telling us that is not actually what will happen. What in the world was she thinking? When a bailout was hastily arranged for uninsured depositors at Silicon Valley Bank and Signature Bank, the implication was that the same thing would be done for uninsured depositors at any other banks that failed.
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