Yellen Says Government Could Backstop More Deposits If Needed

Treasury Secretary Janet Yellen on Tuesday sought to calm worries over the health of the banking system, saying the government could expand the guarantee of deposits if necessary.

In remarks prepared for a speech to the American Bankers Association, Yellen described the banking system as “sound” and said actions already taken by authorities were “stabilizing the system.”

“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system,” Yellen said. “Similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”

The comments were released Tuesday morning prior to the opening of U.S. markets, hours before they are expected to be delivered.

“I believe that our actions reduced the risk of further bank failures that would have imposed losses on the Deposit Insurance Fund, which is paid for through fees on insured banks,” Yellen said.