(JustPatriots.com)- The United States government has already stepped in to provide relief to depositors at failed financial institutions Silicon Valley Bank and Signature Bank, and now, Janet Yellen said that more of these could be on the horizon.
Yellen, the U.S. treasury secretary, made her remarks on Tuesday while appearing at a meeting of the American Bankers Association, which was held in Washington, D.C.
While the Biden administration said that it wouldn’t help out investors on the two failed regional banks – since they took a risk and knew it when they invested – it did step up and help depositors who had money at the institutions. As a result of the two banks’ collapses, there have been greater concerns about the overall health of the economy and what role the federal government would play to help these struggling financial institutions.
In her comments, Yellen praised the “swift response” the government had that directed federal funds to the banks. Those efforts, though, “were not focused on aiding specific banks or classes of banks,” she said. “Our intervention was necessary to protect the broader U.S. banking system.”
But, the comments she made next were the ones that raised eyebrows at the meeting. She said:
“Similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
Those comments certainly signaled that the federal government is prepared to take similar action if other banks ultimately end up failing in a similar way to Silicon Valley Bank and Signature Bank.
Playing to her role as Treasury Secretary, Yellen tried to reassure those in attendance at the meeting that the U.S. economy is on solid ground. She said:
“The situation is stabilizing, and the U.S. banking system remains sound.”
President Joe Biden himself has said on multiple occasions that taxpayers wouldn’t have to foot the bill for these bank bailouts. But, many critics don’t believe that he is actually right when he makes those statements.
The Heritage Foundation’s economist, E.J. Antoni, recently said:
“The deposit insurance fund doesn’t have anywhere near enough liquidity to cover depositors. If it did, the Federal Reserve would not have had to announce an emergency lending fund to meet the demand for liquidity.
“There is no way around the reality that taxpayers are on the hook here. When the FDIC runs out of cash, it simply goes to the Treasury for more, as we saw in 2009. There’s three ways to pay for that.
First, the FDIC can increase its insurance premiums charged to banks. But, those fees that finance the FDIC are passed entirely on to customers. The second option is for the Treasury to just give the money to FDIC instead of loaning it, in which case the taxpayer is directly responsible for it.
“Lastly, the Fed can finance the expense by just printing the money, which causes inflation, which is a hidden tax.”