Treasury Secretary Janet Yellen will sit for her third congressional hearing in a week on Thursday, where, once again, she's likely to be pressed on whether the U.S. government will guarantee all of the country's $19.2 trillion in bank deposits.
The comments drew quick criticism from investors, including Bill Ackman, who has relentlessly warned of dire consequences to small U.S. banks if the government doesn't cough up a bigger guarantee, was quick to criticize Yellen.
"I would be surprised if deposit outflows don't accelerate effective immediately. A temporary systemwide deposit guarantee is needed to stop the bleeding," Ackman said on Twitter after Yellen's testimony to a Senate committee on Wednesday. But those market demands fail to take into account the political reality that the Biden administration faces, regulatory experts say.
"This can't be done by executive order," said Andrew Levin, a Dartmouth College economics professor and former Fed official. He added that going through Congress is "politically infeasible." Setting aside Congress's authority, the issue is a non-starter in most U.S. government offices, sources say. The idea was mentioned in an official brainstorming session after SVB's March 10 collapse, but sourcesYellen is due to testify later on Thursday before the U.S. House of Representatives Appropriations Subcommittee on Financial Services and General Government.Our Standards:
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