(Headline USA) Treasury Secretary Janet Yellen left GOP jaws dropped on the Senate floor by continuing to downplay what many believe to be the root cause of the Biden administration’s persistent economic woes.
A week after the second-largest bank collapse in U.S. history, Yellen told the Senate Finance Committee on Thursday that the nation’s banking system “remains sound” and Americans “can feel confident” about their deposits.
Moreover, as skyrocketing inflation gives way to a recessionary climate, resulting in Federal Reserve rate hikes that have, in turn, contributed to bank failures, Yellen claimed that Democrats’ reckless deficit spending was of little consequence.
The denial left Sen. Ron Johnson, R-Wisc. practically speechless.
Many Twitter users, however, were quick to chime in with their own thoughts.
Lastly, Yellen said that she didn’t believe that enormous deficit spending was “not a main factor in increasing inflation“. That statement is so stupid, deranged that it’s almost inconceivable that it could possible come from anyone in a position to make economic decisions. OMG
— Felix Boot (@BootFelix) March 16, 2023
Yellen’s remarks, coming against the backdrop of deepening concerns about the health of the global financial system, were an effort to signal to markets that there would be no broader contagion from the collapse of Silicon Valley Bank in California and Signature Bank in New York.
But it would not be the first time she has engaged in public gaslighting before Congress. For much of 2021, she insisted that, despite clear warning signs, inflation would be “transitory” before finally admitting she was wrong.
Facing fierce questioning by lawmakers on how Federal Reserve interest rates contributed to the bank failures and whether taxpayers would bear the brunt of the commitment to make depositors at the banks whole, Yellen stressed the need for the federal government to act to assure stability in the market.
“We certainly need to analyze carefully what happened to trigger these bank failures and examine our rules and supervision” to prevent failures from happening again, Yellen told the committee.
Yellen was the first Biden administration official to face lawmakers over the decision to protect uninsured money at two failed regional banks, a move that some have criticized as a bank “bailout.”
Both of the banks now subsidized by taxpayers had brazenly prioritized woke virtue-signaling while ignoring sound financial policy. Many of the major investors in SVB in particular were members of the leftist Elite, such as California Gov. Gavin Newsom, who praised the government for protecting his wineries.
“The government took decisive and forceful actions to strengthen public confidence” in the U.S. banking system, Yellen claimed in her testimony. “I can reassure the members of the committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them.”
Yellen also defended the government’s bogus claim that taxpayers will not bear the cost of protecting uninsured money at two failed regional banks.
The week has been a whirlwind for markets globally on worries about banks that may be bending under the weight of the fastest set of hikes to interest rates in decades.
In Europe, troubles at Credit Suisse, Switzerland’s second-largest lender this week prompted the Swiss central bank to agree to loan Credit Suisse up to 50 billion francs.
In less than a week, Silicon Valley Bank, based in Santa Clara, California, failed after depositors rushed to withdraw money amid anxiety over the bank’s health. Then, regulators convened over the weekend and announced that New York-based Signature Bank also failed. They ensured all depositors, including those holding uninsured funds exceeding $250,000, were protected by federal deposit insurance.
The Justice Department and the Securities and Exchange Commission have since launched investigations into the Silicon Valley Bank collapse.
Thursday’s hearing, meant to address President Joe Biden’s $7 trillion budget proposal, came after the sudden collapse of the nation’s 16th-biggest bank and go-to financial institution for tech entrepreneurs.
While lawmakers questioned Yellen on the deficit and upcoming debt ceiling negotiations, many focused instead on what role regulators played in the bank failures.
The Biden administration’s “handling of the economy contributed to this,” insisted Sen. Tim Scott, R-S.C. “I plan to hold the regulators accountable.”
Sen. Mark Warner, D-Va., wondered aloud, “Where were the regulators in all of this?” and called for accountability in the bank run.
Sen. Mike Crapo of Idaho, the committee’s top Republican, said, “I’m concerned about the precedent of guaranteeing all deposits,” calling the federal rescue action a “moral hazard.”
Yellen claimed on CBS’s Face the Nation Sunday that a bailout was not on the table, stating, “we’re not going to do that again,” referring to the U.S. government’s response to the 2008 financial crisis, which led to massive government rescue policies to large U.S. banks.
But that appears to have been little more than a redefining of the word “bailout” much as the administration previously redefined the word “recession” to insist prior to the 2022 midterm election that the economy had not entered into one, despite having two consecutive periods of negative growth.
Yellen, a former Federal Reserve chair and past president of the San Francisco Federal Reserve during the 2008 financial crisis, was a leading figure in the resolution this past weekend, which was engineered to prevent a wider systemic problem in the banking sector.
“This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe,” she said.
Adapted from reporting by the Associated Press