Yellen Says Treasury Isn’t Considering Guaranteeing All Bank Deposits

The banking sector gave us a scare in the last weeks when a couple large banks were forced to close doors after a large wave of withdrawals forced them to sell bonds for significant losses. Markets stabilized last week when regulators came to the rescue and guaranteed deposits past what was insured for those banks.

Yellen made it clear today that was not a handout everyone is entitled to, just the aggressive start-ups of Silicon Valley.

At a Senate hearing Wednesday, Ms. Yellen was asked if the Treasury was looking at taking steps to expand deposit insurance without Congressional authorization.

“This is not something that we have looked at. It’s not something that we’re considering,” she said. “I have not considered or discussed anything having to do with blanket insurance or guarantees of all deposits.”

This makes sense considering the country is out of money to spend, but I don't think many appreciate the favoritism. What Yellen is actually doing is demonstrating a vote of confidence that the U.S. banking system does not need these extreme measures. If she said they were considering such an option, investors would rightfully assume there are real problems. At least acting like there isn't keeps investors unprovoked for now.