Fed boss Jerome Powell said on Tuesday that banking supervision and regulation needed to be strengthened after the collapse of Silicon Valley Bank (SVB). Pointing to "mismanagement" by the management of the American bank, he was surprised at the extreme speed of the massive withdrawal of funds by customers. “How did this happen is the question,” he added, recalling that an investigation by regulators was ongoing and that he supported an independent investigation as well.
The Fed also warned in a statement that the recent banking crisis was "likely ... to weigh on economic activity, hiring and inflation". "The magnitude of these effects is uncertain," she said. But savers' money is "safe" and the banking system remains strong, Fed Chairman Jerome Powell said at a press conference, noting that the institution is "committed to learning the lessons of the episode".
Fed officials mostly anticipate additional rate hikes in the coming months, but refer more broadly in the statement to "additional policy firming actions," without mentioning rates specifically. Despite the difficulties, the possibility of a soft landing for the US economy "always exists", added Jerome Powell, saying that the Fed is "trying to find" the right path.
The recent bankruptcies of US regional banks Silicon Valley Bank (SVB), Signature Bank and Silvergate have created a wave of concern. Governments, central banks and regulators intervened urgently to try to restore confidence, the best weapon to avoid contagion.
U.S. Treasury Secretary Janet Yellen told a Senate committee on Wednesday that "the U.S. banking system is sound." "Recent actions by the federal government have demonstrated our strong commitment to taking the necessary steps to ensure the safety of depositors' savings," she added. “It is important to be clear: shareholders and creditors of failing banks are not protected by the government. And no loss (...) will be borne by the taxpayer", also underlined the Minister of Economy and Finance of Joe Biden
