Treasury Secretary Janet Yellen admitted before Congress that the Biden administration would be bailing out Chinese depositors in Silicon Valley Bank while community banks will be made to pay higher fees.
Yellen spoke at a Senate Finance Committee hearing on Thursday, where she was supposed to discuss President Joe Biden’s budget proposal — but the recent collapse of Silicon Valley Bank (SVB) and other financial institutions, along with the resulting instability in the banking sector, caused most of the conversation to revolve around the Biden administration’s response to the crisis.
Sen. James Lankford (R-OK) questioned the treasury secretary about the federal government’s decision to SVB’s collapse.
The FDIC recently announced that they would be ignoring their long-standing policy of only insured up to $250,000 per depositor, and would instead be ensuring the full amount of funds for each depositor. Lankford asked Yellen if Chinese investors, including those with connections to the Chinese Communist Party, would also be bailed out.
“It has been reported publicly that SVB had a large number of Chinese investors, including some that are directly connected to the Chinese Communist Party,” the Republican senator said. “Will those companies, entities, and investors that are Chinese investors be made whole based on assessments in my banks in Oklahoma? So, what I’m asking is, will my banks in Oklahoma pay a special assessment to be able to make Chinese investors whole from Silicon Valley Bank?”
Yellen admitted that this bailout “could include foreign depositors,” stating that there wasn’t a “legal basis to discriminate” against foreign account holders.
“Uninsured investors will be made whole in that bank and I suppose that could include foreign depositors, but I don’t believe there is any legal basis to discriminate among the uninsured,” the treasury secretary stated.
Janet Yellen admits to Sen. Lankford that American community banks may be on the hook to bail out SVB’s Chinese depositors. pic.twitter.com/KXEAxpyT3a
— Mariana (@lonestarherd) March 16, 2023
The Biden administration’s efforts to avoid a banking crisis will also include implementing a special assessment on banks — which is an additional fee — in order to replenish the Deposit Insurance Fund that they will be draining to bail out wealthy Silicon Valley investors.
Lankford responded to Yellen’s admission by decrying the fact that community banks will be forced to pay an additional fee to bail out Chinese investors.
Yellen then claimed that the federal government is doing what it can to stave off a worsening economic situation.
“If we have a collapse of the banking system and its economic consequences, that will have very severe effects on the banks in Oklahoma,” she said.
Just so the Biden Admin's stance is clear:
If you're a Silicon Valley VC, a Chinese foreign national, or an unprofitable green start-up – you'll be bailed out.
But if you're a farmer, a factory worker, a small business owner or a local bank that supports them – wait and see… pic.twitter.com/mpghONOYHS
— Will Hild (@WillHild) March 16, 2023