Government could ‘take additional action’ to protect deposits, Yellen says
Zachary Halaschak
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Treasury Secretary Janet Yellen said Thursday that the government is prepared to take further steps to protect deposits if needed.
Yellen made the comments during prepared remarks for testimony before a House panel. The prepared remarks were identical to ones she gave Wednesday to a different committee, apart from the comments about being prepared to go further should it be warranted.
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“As I have said, we have used important tools to act quickly to prevent contagion,” she said Thursday. “And they are tools we could use again. The strong actions we have taken ensure that Americans’ deposits are safe. Certainly, we would be prepared to take additional actions if warranted.”
Markets appeared to react positively to the addition, with major stock indices turning positive following her comments.
Yellen’s remarks the previous day had had the opposite effect on the stock market. Yellen, testifying at the same time that Fed Chairman Jerome Powell gave his press conference following the latest rate hike, fielded a question about whether officials are looking into ways to expand FDIC coverage to all deposits.
“This is not something we have looked at, it’s not something that we’re considering,” she told lawmakers.
Fed watchers and investors were quick to highlight the contrast between her remarks and Powell’s comments. During his press conference with reporters after the Fed’s 0.25 percentage point rate hike, Powell emphasized that depositors’ savings in the banking system are safe.
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“But what I’m saying is you’ve seen that we have the tools to protect depositors when there is a threat of serious harm to the economy or to the financial system, and we’re prepared to use those tools,” Powell said.
The dissonance caused the Dow Jones Industrial Average to close down more than 500 points on Wednesday. The tech-heavy Nasdaq and the S&P 500 both plunged by more than 1.6%.