Banks are likely to scale back lending in the aftermath of the recent banking crisis and do part of the federal government’s job of cooling inflation, Treasury Secretary Janet Yellen said Sunday.
“Banks are likely to be a bit more cautious in this environment,” Yellen said in an interview on CNN’s “Fareed Zakaria GPS” broadcast on Sunday morning. “That tends to lead to a bit of a tighter credit squeeze that could be a proxy for the new interest rate hikes the Fed needs to do.”
The staggering collapse of Silicon Valley Bank and Signature Bank in March has raised fears of another banking disaster on the scale of 2008. The Treasury Department, working with the Federal Reserve and the Federal Deposit Insurance Corporation, intervened after the bankruptcies of regional banks and promised that “no loss associated with the resolution will be borne by the taxpayer.”
The actions taken by the agencies “stopped the systemic threat that was out there,” Yellen said.
“We took steps to make sure depositors felt their savings were safe, and the tools we used to do that are ones we could and would use again if difficulties at a single bank or a couple of banks created a risk of contagion to the system. he told Zakaria.
Asked about the “balance” between inflation and unemployment, Yellen said it is possible to achieve a “soft landing” by slowing the economy enough to keep inflation in check, but not so much that many Americans lose their jobs.
“I think there is a way to reduce inflation while maintaining what we all consider to be a strong labor market,” Yellen said. “And the evidence that I’m seeing indicates that we’re on that path.”
“Are there risks? Of course. I don’t want to downplay the risks, but I think it’s possible,” she added.
The Treasury minister then blamed the ongoing conflict between Russia and Ukraine for raising food and energy prices, and the COVID-19 pandemic for causing supply chain disruptions in key sectors such as the auto industry.
“We are seeing that the bottlenecks in the supply chain that drove inflation are beginning to be resolved,” he said. “We had big changes in the way people live and low interest rates, and house prices went up a lot. Now, house prices have essentially stabilized.”
Yellen also agreed that Russia should be made to pay for the reconstruction of Ukraine, but did not say whether she supports the seizure of Russian assets for that purpose.
“Russia should pay for the damage it has done to Ukraine,” he said. “But, you know, there are legal restrictions on what we can do with the frozen Russian assets, and we are discussing with our partners what might happen in the future.”
Join our Telegram channel to receive the latest news instantly clicking here
© The Epoch Times in Spanish. All rights reserved. Its reproduction is prohibited without express permission.
How can you help us to keep informing
Why do we need your help to fund our news coverage in the United States and around the world? Because we are an independent news organization, free from the influence of any government, corporation or political party. Since the day we started, we have faced pressure to silence ourselves, especially from the Chinese Communist Party. But we will not fold. We depend on your generous contribution to continue practicing traditional journalism. Together, we can continue to spread the truth.
