Treasury Secretary Janet Yellen addressed the American Bankers Association on Tuesday, to try to reverse the damage she, herself, had helped unleash last week, when she announced that the total bailout of all depositors at failed Silicon Valley Bank and two smaller banks would not be repeated for medium-sized banks in the future, but only for systemically risky giga-banks. That, predictably, led to “mounting evidence that panicked depositors are pulling savings out of regional banks,” as the Financial Times put it today, and so Yellen today reversed field:
“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader US banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion…. Large banks play an important role in our economy, but so do small and mid-sized banks,” Yellen stated.
