After Sparking Rout, Yellen Changes Key Part Of Prepared Testimony, Says "Prepared For Additional Deposit Action"

Tyler Durden's Photo
by Tyler Durden
Thursday, Mar 23, 2023 - 07:18 PM

After sparking a market rout on Wednesday and even prompting Bill Ackman to call her out for sparking a new bank run,  moments ago the senile, 76-year-old Treasury Secretary Janet Yellen emerged for her second day of testimony on the Hill and, realizing that blowing up the market in addition to sparking a recession and destroying the US banking system may not be the look her just as senile boss is going for, changed a key section of her testimony.

One day after her prepared remarks to the Senate Financial Services Committee sent stocks plunging when she said that she had neither considered nor examined the possibility of expanding federal insurance temporarily to all US bank deposits without congressional approval - as such a move would require legislation, although regulators were prepared to repeat depositor rescues if an individual bank failure threatened to provoke a wider contagion of bank runs -  in the process nullifying everything Powell said in hopes of stabilizing the relentless bank selloff, Yellen now plans to tell US lawmakers that regulators would be prepared for further steps to protect deposits if warranted, in new language that differs from her prepared remarks to the Senate a day earlier.

Here is the paragraph that graced her speech yesterday:

As I said last week, the U.S. banking system is sound. The federal government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings remain safe.

Today, that entire paragraph has been deleted and replaced with the following:

“As I have said, we have used important tools to act quickly to prevent contagion. And they are tools we could use again. The strong actions we have taken ensure that Americans’ deposits are safe. Certainly, we would be prepared to take additional actions if warranted.”

The added comment, which Yellen is scheduled to deliver at 3 p.m. before a subcommittee of the House Appropriations Committee, comes amid close scrutiny of the Biden administration’s flipflopping stance on bank deposits amid media reports that a uniform insurance on all deposits will be implemented.

And while Yellen's hope is that the market would focus on the addition of this section: "would be prepared to take additional actions if warranted" which it did indeed for about 2 minutes, it has since shifted its attention to what was deleted, namely "As I said last week, the U.S. banking system is sound."

So in the span of 24 hours, did something change - besides Powell hiking 25bps of course - to make the banking system no longer demonstrably sound.

In any case, after plunging to session lows ahead of her speech, stocks kneejerked higher, only to drift lower again...

... with bank stocks now back near session lows as the market will keep pushing the clueless - now laughably so  - Fed and Treasury until they capitulate, guarantee all depositors, cut rates and launch QE.