US Treasury Secretary Janet Yellen says the federal government could guarantee all the deposits of smaller banks if they “suffer deposit runs that pose a risk of contagion.” The government recently protected all Silicon Valley Bank and Signature Bank deposits after they failed.
The US government is ready to guarantee more deposits if necessary
US Treasury Secretary Janet Yellen said in a speech to the American Bankers Association on Tuesday that the government stands ready to provide additional deposit guarantees if the banking crisis worsens.
Following the failures of several major banks, including Silicon Valley Bank and Signature Bank, the government stepped in and guaranteed all deposits of the two failed banks beyond the FDIC’s usual $250,000 coverage limit. The former Federal Reserve Chairman explained:
The steps we took were not focused on helping specific banks or classes of banks. Our intervention was necessary to protect the US banking system in general. And similar actions could be justified if smaller institutions suffer runs on deposits that present a risk of contagion.
“The situation is stabilizing. And the American banking system remains strong,” Yellen insisted.
Nonetheless, Treasury Department staff are reportedly exploring ways to temporarily expand FDIC insurance coverage to all deposits, Bloomberg reported Monday.
Last week, the Mid-Size Bank Coalition of America asked federal regulators to extend FDIC insurance to all deposits for the next two years. “It is imperative that we restore confidence among depositors before another bank fails, avoiding panic and a new crisis,” the group said. In addition, US Congressman Blaine Luetkemeyer urged the government to temporarily insure all of the country’s bank deposits to prevent runs on smaller banks.
However, Yellen last week scrapped the idea of the government providing guarantees for all deposits in the event of future bank failures.
Do you think the government should guarantee all deposits from all banks? Let us know in the comments section.
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