Federal Reserve Chair Jerome Powell said during Wednesday’s press conference that the Fed would use “all of our tools” to keep the banking system safe in the wake of the Silicon Valley Bank (SVB) collapse earlier this month.
“Our banking system is sound and resilient, with strong capital and liquidity. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound,” Powell said.
Federal Reserve Chairman Jerome Powell speaks during a House Financial Services Committee hearing to examine the Semiannual Monetary Policy Report to Congress, Wednesday, March 8, 2023, on Capitol Hill in Washington. (AP Photo/Jose Luis Magana)
“We are committed to learning the lessons from this episode and to work to prevent episodes from events like this from happening again,” Powell added.
The Federal Reserve Chair was referring to SVB collapsing at the beginning of the month when panicked customers suddenly withdrew tens of billions of dollars after it announced a loss of approximately $1.8 billion from selling its investments in U.S. treasuries and mortgage-backed securities.
Security guards let individuals enter the Silicon Valley Bank’s headquarters in Santa Clara, California, on Monday, March 13, 2023. (AP Photo/ Benjamin Fanjoy)
Ultimately, regulators shut down the bank, and the FDIC took control. It was later said that the government, such as the Fed, Federal Deposit Insurance Corporation (FDIC), and the U.S. Treasury, would protect all depositors, even those past FDIC’s $250,000 limit.
SVB reopened early last week as Silicon Valley Bridge Bank, N.A., under FDIC control. Both insured and uninsured had all assets transferred to the bridge bank. The bridge bank allows time for the agency to stabilize the institution and market the franchise. Until further notice, the bridge bank will continue to operate as a nationally chartered bank, so depositors have full access to all of their money.
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Later in the press conference, Powell acknowledged that the issues in the banking system would create tighter credit conditions for the time being and compared the banking issues to additional rate hikes.
“We believe, however, that events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and business, which would, in turn, effect economic outcome,” he stated. “It is too soon to determine the extent of these effects, and therefore too soon to determine how monetary policy should respond.”
Before the press conference, the Fed increased interest rates by a quarter of a percent (25 basis points).
Jacob Bliss is a reporter for Breitbart News. Write to him at jbliss@breitbart.com or follow him on Twitter @JacobMBliss.
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