Oklahoma Republican Sen. James Lankford grilled Treasury Secretary Janet Yellen on Thursday over whether Oklahomans would be bailing out Chinese investors and whether small banks would be hurt by the bailout.
Yellen was testifying at the Senate Finance Committee hearing.
“Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now? Are they fully covered, 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?” Lankford began.
“A bank only gets that treatment if a majority of the FDIC board, a super majority 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,” Yellen replied.
“So what is your plan to keep large depositors from moving their funds out of community banks into the big banks?” Lankford asked. “We have seen the merger’s of banks over the past decade and 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 gonna make you whole but if you go to one of our preferred banks, we will make you whole at that point.'”
“Look, I mean that’s certainly not something that we’re encouraging,” Yellen testified.
“That is happening right now!” Lankford shot back.
“That is happening because depositors are concerned about the bank failures that have happened and whether or not other banks could also fail-”
“No, it’s happening because you’re fully insured no matter what the amount is if you’re in a big bank, you’re not fully insured if you’re in a community bank,” Lankford cut in, arguing Signature Bank just barely met the threshold for government help.
“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 that banking system overall is safe and sound, depositors should have confidence,” Yellen said, justifying her position. (RELATED: ‘That’s A Lie’: GOP Senator Presses Janet Yellen On Plan To Pay For Social Security)
Lankford then grilled Yellen as to whether special assessments on banks would apply to all banks, including rural and small banks.
“I’m not certain what the rules are around that, that’s up to the FDIC to determine,” Yellen said.
Lankford then questioned Yellen about whether Chinese investors will be made whole based on special assessments.
“Will my banks in Oklahoma pay a special assessment to make Chinese investors whole from Silicon Valley Bank?”
“Uninsured investors will be made whole in that bank,” Yellen said. “I suppose that could include foreign depositors but I don’t believe there’s any legal basis to discriminate amongst uninsured depositors.”
Lankford then argued he was worried about long term consequences before his time was cut off.