Treasury Secretary Janet Yellen testified before the Senate Finance Committee and admitted to Senator James Lankford that smaller regional banks across the country will not be bailed out by the U.S. government. Only “Big” banks like Silicon Valley Bank, and their depositors, including businesses affiliated with the CCP in China, will be bailed out. Are these “Big” banks full of Democrat donors like FTX?
Sen. James Lankford: Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now? Are they fully recovered? Every bank, every community bank in Oklahoma, regardless of the size of the deposit, will they get the same treatment that SVB just got or Signature Bank just got?
Janet Yellen: A bank only gets that treatment if a majority of the FDIC board, a supermajority, a supermajority of the Fed board, and I, in consultation with the president, determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.
Sen. Lankford: Right. So what is your plan to keep large depositors from moving their funds out of community banks into the big banks? We have seen the mergers of banks over the past decade. I’m concerned you’re about to accelerate that by encouraging anyone who has a large deposit in a community bank to say, we’re not going to make you whole, but if you go to one of our preferred banks, we will make you whole, at that point.
Janet Yellen: Look, I mean, that’s certainly not something that we’re encouraging
Sen. Lankford: That is happening right now.
Janet Yellen: That is happening because depositors are concerned about the bank failures that have happened and whether or not other banks could also fail.
Sen. Lankford: No, it’s happening because you’re fully insured, no matter what the amount is, if you’re in a big bank. You’re not fully insured if you’re in a community bank.
Janet Yellen: Well, you’re not fully insured and
Sen. Lankford: You were at Signature and it was, it just barely met that threshold you were at Signature.
Janet Yellen: Well, we felt that there was a serious risk of contagion that could have brought down and triggered runs on many banks. And that’s something, given that our judgment is that the banking system overall is safe and sound. Depositors should have confidence in the system, and we took these actions.
Sen Lankford: So there’s a special assessment that’s been done on community banks in my state and all banks across the country. Was there any discussion that that special assessment would only apply to the larger banks? Or was it always assumed the special assessment would cover every bank, including rural banks in my state?
Janet Yellen: I’m not certain what the rules are around that for the FDIC to determine.
Sen. Lankford: It has been reported publicly that SVB had a large number of Chinese investors that are there, including some that were companies directly connected to the Chinese Communist Party. Will those individuals, companies, entities, and investors that are Chinese investors be made whole based on assessments in my banks in Oklahoma? So what I’m asking is, will my banks in Oklahoma pay a special assessment to be able to make Chinese investors whole from Silicon Valley Bank?
Janet Yellen: Uninsured investors will be made whole in that bank, and I suppose that could include foreign depositors, but I don’t believe there’s any legal basis to discriminate among uninsured.
Sen. Lankford: I get it, but I’m just saying my community banks are going to pay this additional fee. It is always fascinating to me as well, the conversation, that taxpayers are being made whole in this, that taxpayers are not going to have any kind of consequence on this. I’m sure my bankers are going to be very excited to know they no longer pay taxes, and their banks no longer pay taxes. Credit unions don’t pay taxes, banks do, and so they’re definitely taxpayers as well, and all banks make their revenue off of rates and fees and such to their account holders, which means every Oklahoma will pay higher fees in their community bank.
Janet Yellen: If we have a collapse of the banking system and it’s economic consequences that will have very severe effects on banks in Oklahoma that will also be threatened . . .
Sen. Lankford: I’m just worried about, I’m just worried about the long term consequences on our banks as well.