Can We Bank on Yellen & Powell?

Stock prices fell after Fed Chair Jerome Powell's press conference today, which was actually relatively dovish. He said that inflation remains too high, but the banking crisis might force the Fed to pause tightening soon. Of greater concern to the stock market was that US Treasury Secretary Janet Yellen said at a congressional  hearing this afternoon:  “I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits.” The day before at a conference sponsored by the American Bankers Association, she said "Let me be clear: the government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe." She added, "The situation is stabilizing. And the US banking system remains sound." Yet her speech today was destabilizing.

Yellen and Powell  need to get their acts together. They both claim that the banking system remains sound. They both want to protect depositors during the current banking crisis. Neither is in a position to provide insurance coverage to all depositors. So they are trying to convince the public that they can keep their banks safe by providing access to additional sources of liquidity, which perversely raises doubts about the soundness of the banking system.