Treasury Secretary Janet Yellen was caught flat-footed on Thursday during testimony before the Senate Finance Committee, after Sen. James Lankford (R-OK) grilled her over whether all deposits at Oklahoma community banks would now be fully insured like those at Silicon Valley Bank and Signature Bank.
"Will they get the same treatment that SVB just got, or Signature Bank just got?" asked Lankford.
"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," Lankford said.
"That is certainty not something that we’re encouraging," Yellen replied.
"A bank only gets that treatment" under the systemic risk exception rule, Yellen continued, explaining that it takes a 'supermajority' vote to do so.
"I, in consultation with the president, determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences," she said.
Chinese investors made whole?
Lankford then noted that it has been reported that many Chinese funds and startups, including those with ties to the CCP, had invested with SVB.
"Will my banks in Oklahoma pay a special assessment to be able to make Chinese investors whole from Silicon Valley Bank?" Lankford asked, to which Yellen replied, "I suppose that could include foreign depositors."
"I don’t believe there’s any legal basis to discriminate among uninsured," she continued.
Here is the snippet: pic.twitter.com/85iBeXC0Wn— Seidler (@SeidlerCorp) March 17, 2023
In a Wednesday letter to Yellen, Sen. Marco Rubio requested that the US government must ensure that "hostile, foreign adversaries" must not benefit from the collapse of SVB.
"I ask the department to ensure that foreign adversarial regimes, as well as companies subject to their jurisdiction, are unable to exploit this moment for their own material benefit," wrote Rubio.
"As the Department of Treasury, in tandem with the Federal Reserve and the FDIC, continues its response, I request information from the Department of Treasury regarding depositors from the PRC, including Hong Kong and Macau, that can expect to receive federal reimbursements from the Deposit Insurance Fund and other federal relief," the letter continues.
SVB reportedly had an estimated $13.9 billion in uninsured or uncovered foreign deposits.
In a March 11 statement, SPD Silicon Valley Bank—a joint venture with the state-owned Shanghai Pudong Development Bank—confirmed that its operations were “sound.”
“The bank has a standardized corporate governance structure and an independent balance sheet,” the company said in a statement.
Andon Health, a medical devices manufacturer, confirmed in a filing to the Shenzhen Stock Exchange that all of its deposits at SVB “can be used in full and have not suffered any losses.” BeiGene, one of the largest drug companies in China, announced that it had $175 million in uninsured cash deposits at SVB. Pharmaceutical firm Zai Lab maintained $23 million in deposits.
Others, such as Everest Medicines and CStone Pharmaceutical, assured investors that the SVB failure would not affect their overall operations. -Epoch Times