Janet Yellen Just Poured Lighter Fluid On Every Small Bank In America

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    by Michael Snyder, End Of The American Dream:

    What in the world was she thinking?  When a bailout was hastily arranged for uninsured depositors at Silicon Valley Bank and Signature Bank, the implication was that the same thing would be done for uninsured depositors at any other banks that failed.  But now U.S. Treasury Secretary Janet Yellen is telling us that is not actually what will happen.  She just admitted that depositors at a failed bank will only be protected if officials determine that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences”.  So that means that depositors at big banks are likely to be protected and that depositors at small banks are much less likely to be protected.  In other words, Janet Yellen just poured lighter fluid on every small bank in America.

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    Why would anyone keep more than $250,000 in a small bank at this point when there is a very real risk of losing all of the uninsured money if the bank suddenly fails?

    Wealthy people are not stupid.  They are going to move billions of dollars from small banks to large banks in the days ahead, and that is going to cause a tsunami of stress on those small banks.

    Does Janet Yellen even understand what she just did?

    During congressional testimony on Friday, Senator James Lankford asked Yellen the sort of question that many of us have been hoping that someone would ask

    Republican Sen. James Lankford of Oklahoma pressed Yellen about how widely the uninsured deposit backstops will apply across the banking industry.

    “Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now?” asked Lankford. “Will they get the same treatment that SVB just got, or Signature Bank just got?”

    Incredibly, Yellen came right out and admitted that uninsured deposits will only be protected under certain circumstances

    Yellen acknowledged they would not.

    Uninsured deposits, she said, would only be covered in the event that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”

    If your bank fails in the days ahead, bureaucrats in Washington will get together and take a vote to determine if the uninsured depositors at your bank are important enough to protect or not.

    Needless to say, that means that wealthy individuals with very large balances at very small banks are at great risk.

    Senator Lankford clearly understood that Yellen and her fellow bureaucrats have now created a two-tier banking system

    “I’m concerned you’re … encouraging anyone who has a large deposit at 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.’”

    If you have not seen the exchange between Lankford and Yellen yet, you can view it here

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