On 3/16/2023, during a Senate Finance Committee hearing, Senator James Lankford (R-OK) questioned Treasury Secretary Janet Yellen about the Silicon Valley Bank and Signature Bank full bailout for billionaires, including the potential for bailing out foreign investors in China, and how Oklahoma’s community banks and taxpayers will be on the hook for a bank failure they had nothing to do with.
Sen. 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 SVBP 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…
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.
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.
Lankford point blank asked if Oklahoma’s community banks’ large depositors would be treated with the same protection as was given to large depositors, many from China — individuals and corporate structured also. Yellen answered that was up to the “opinion of the FDIC (in a nutshell; translated).” Lankford also pointed out that his community banks in Oklahoma will be paying for fee taken from all banks to pay for the guarantee to SVB, but are not promised to be getting the same protection. As Lankford’s time expired, Yellen used fear of a banking meltdown to justify the favorite treatment she & the FDIC just gave out.
To address the crisis, U.S. bank regulators announced a plan last weekend to fully insure all deposits at SVB as well as the crypto-friendly Signature Bank. This would cover all deposits above the Federal Deposit Insurance Corp.’s insured limit of $250,000. Federal officials said the plan would be paid for by a special fee levied on all FDIC institutions. While all banks would be required to pay for the plan, Yellen said under questioning that it would not apply to every bank. She said the federal government would extend the privilege only to troubled banks whose failure would have a profound impact on the U.S. financial system. Uninsured deposits, Yellen said, would be covered only if a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences,” which would be decided by a supermajority of the FDIC’s board members, Yellen, and the President.
https://facebook.com/HygoNewsUSA/videos/731434335366875/
Lankford Spars with Yellen on Billionaire Bailout, Smaller Banks Not Bailed Out, Only Big Banks Deemed Worthy