US Treasury Secretary Janet Yellen has announced that banks will receive funding from the Federal Reserve. This move is expected to provide additional support to the US financial system and further boost the country’s economic recovery. Yellen said that the move was critical to ensuring that banks had adequate liquidity to meet the demands of their customers. The announcement comes as the US continues to grapple with the impact of the COVID-19 pandemic on its economy.
The recent collapse of US banks, including Silicon Valley and Signature Bank, caused concern among customers who feared losing their money. However, Treasury Secretary Janet Yellen reassured the markets that the federal government is committed to protecting customers’ deposits in these failed banks. CNBC reported that Yellen told lawmakers and the public that the government is dedicated to ensuring a sound banking system to boost confidence in the safety of deposits.
Regulators ensured all deposits at the failed banks, including those covered by the FDIC insurance above the $250,000 limit. The Federal Reserve created a discount window and developed a facility that provides one-year loans to help troubled banks faced with increased cash withdrawals. Yellen stated that the government is resolute in ensuring the safety of depositors’ funds and may even cover some uninsured deposits if these failures create significant financial and economic consequences.
The banking sector is currently under tension, with the closure of Silvergate, Silicon Valley, and Signature Bank. Congress is considering legislation to prevent future bank collapses similar to Silicon Valley Bank. Acquisition bids are flowing for the failed banks, and an FDIC spokesperson confirmed that there would be no divestment of crypto activities for the sale of these banks.
Meanwhile, some of the top banks, such as Bank of America Corp, Goldman Sachs, JP Morgan Chase, and Citigroup Inc., are taking steps to support the failing First Republic Bank by injecting $30 billion to support its operations.