Public opinion was divided in the wake of the recent collapse of a few US banks. The majority of Silicon Valley and Signature Bank clients were concerned about possible financial loss in the wake of the banks’ collapse.
The government’s efforts to reclaim customers’ deposits from the two collapsed banks have been led by the Treasury Secretary Yellen . In her remarks, she noted that all of the initiatives show how determined the government is to protect depositors’ money.
She assured lawmakers and the markets that the government is committed to safeguarding bank deposits, according to CNBC news. To increase American’s confidence in the security of their money, Yellon said that the government would ensure a strong banking system.
The Treasury assured that the two failing banks’ customer deposits would be safe. But, she insisted that it wouldn’t apply in all future instances of bank failures.The transfer also included additional deposits that were higher than the $250,000 maximum and were insured by theFederal Deposit Insurance Corporation (FDIC)
Also, the Federal Reserve helped by establishing a discount window. For banks using the discount window to obtain short-term finance, it loosened its borrowing requirements. The Fed also created a facility with no maximum bound that offers loans for one year. This will support certain struggling banks who are dealing with more withdrawals of cash.
She also discussed the potential for paying for uninsured deposits if their collapse results in systemic risk and grave financial and economic repercussions. By doing this, banks will be able to meet all of the needs of their depositors.
Top US banks take action to support failing local banks
Leading American banks have taken action to assist the bankrupt bank. First Republic Bank, one of the local banks, obtained $30 billion in funding to support its operations. Bigwigs including Bank of America Corp., Goldman Sachs, JP Morgan Chase, and Citigroup Inc. lobbied for its survival.
Moreover, the FDIC is allowing First Republic Bank to access funds deposited by customers in other banks as temporary liquidity support. This allows the bank to have access to additional funding when needed, which can help it to stay afloat.