Yellen says the U.S. may also protect smaller banks if needed The Treasury Secretary said the administration is committed to protecting the U.S. banking system and customers who trust their money to it.

Janet Yellen says the U.S. is ready to protect depositors at small banks if required

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Treasury Secretary Janet Yellen says the aftershocks of a massive bank run that toppled two regional banks in the last two weeks appear to be fading. Big depositors are no longer pulling money out of other banks, thanks in part to emergency actions taken by the government. But critics worry those actions could put smaller banks and their customers at a disadvantage. To explain all this, NPR's Scott Horsley joins us now. Hey, Scott.


CHANG: So Yellen spoke to a gathering of bankers in Washington today just as the dust is still clearing from two of the country's biggest bank failures. What exactly does she have to say?

HORSLEY: Well, Yellen says fears of a wider bank run are easing. Treasury officials have been monitoring the banking system since the collapse of Silicon Valley Bank in California and Signature Bank in New York. And there were some big withdrawals early on, but Yellen says those have stabilized. That's partly because the FDIC acted very quickly to say depositors at the two failed banks would get all their money back. Now, ordinarily, the government only insures deposits up to a quarter-million dollars per account, but Yellen says the cap was waived in this case, and that helped limit the fallout and discourage big customers at other banks from getting nervous.


JANET YELLEN: The public should have confidence in our banking system, and it's our intention to remain vigilant in the days and weeks to come.

HORSLEY: The Federal Reserve also set up a new program to lend money to banks if they needed to cover withdrawals, so they don't have to sell assets at a loss. And all this appears to be working. Bank stocks are up this week and so is the broader stock market.

CHANG: OK, that all sounds good, but there's been pushback - right? - like, from banks that are smaller than Silicon Valley and Signature. Tell us why.

HORSLEY: Yeah, the two banks that went under were not giant institutions, but they certainly weren't tiny. Silicon Valley Bank in particular has grown a lot in recent years. And smaller banks around the country, the kind that cater to small businesses and farmers and just ordinary customers, wondered if they would have gotten the same kind of help from the government if they got in trouble. Oklahoma Senator James Lankford put that question to Yellen during a Senate hearing last week.


JAMES LANKFORD: Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now? Will they get the same treatment that SVB just got or Signature Bank just got?

HORSLEY: And Yellen's answer last week was not necessarily. That kind of extraordinary help would only be extended, she said, if it looked as if there were a danger of a more widespread bank run. Now, that worried a lot of community bankers because it might encourage their biggest customers to pull money out of small banks and move to a bigger bank where they might be more likely to get government help.

CHANG: Well, how did Yellen address those concerns when she met with bankers today?

HORSLEY: She said the administration really wants to preserve all kinds of banks, big, medium and small. She acknowledged small banks often know their communities and their customers and can offer services in a way that big banks can't. She says the government isn't trying to prop up any one bank or any one category of bank but rather the whole banking system, and she left the door open to doing more for small banks.


YELLEN: That means potentially intervening if a smaller bank experiences the kinds of difficulties we have seen that pose the risk of contagion.

HORSLEY: You know, Ailsa, before all this happened, the government thought a bank run at a small institution would probably stay small and not require a lot of government attention, but now officials are reevaluating just how contagious even a bank run that starts out small might turn out to be.

CHANG: That is NPR's Scott Horsley. Thank you, Scott.

HORSLEY: You're welcome.

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