Yellen Shifts Stance on Banking System After Startling Markets with Deposit Insurance Confusion

Federal Reserve Chairwoman Janet Yellen changed her tune on Thursday, offering support for the banking system a day after rattling markets with comments about deposit insurance. On Wednesday, she said that the Treasury Department had not considered expanding federal insurance to all U.S. bank deposits, which caused concern among investors and sent stocks tumbling lower.

However, in a statement released on Thursday morning, Yellen clarified her remarks from the previous day saying “I want to be clear that I strongly support measures taken by our nation’s financial regulators to ensure the stability of our banking system.” She went further by emphasizing how important it is for banks and other financial institutions to have access to sufficient liquidity during times of economic stress or market volatility as well as to ensure they are adequately capitalized so they can serve their customers’ needs without disruption or failure due to lack of funds.

Yellen also noted that while there may be some areas where additional regulation is needed, such as cyber security threats or money laundering activities; those issues should not detract from recognizing how far we have come since 2008 when many banks were undercapitalized and illiquid due in large part because of inadequate supervision prior too 2007-2008 crisis period. With this statement, Yellen sought to reassure investors that despite recent waffles regarding deposit insurance, the US government remains committed to providing strong oversight over its banking sector going forward.