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U.S. Deputy Treasury Secretary Wally Adeyemo reflects on the week of banking instability


It's been a confusing, unsettled week for the U.S. economy with banking worries, skittish markets and heightened concerns about a recession. We are joined now by U.S. Deputy Treasury Secretary Wally Adeyemo. Mr. Deputy Secretary, thanks so much for being with us.

WALLY ADEYEMO: Thank you for having me.

SIMON: The federal government stepped in quickly this week to facilitate big banks - put up money to stabilize First Republic Bank. And yet that bank stock tanked. Was that action enough?

ADEYEMO: So, Scott, the U.S. government acted quickly to resolve two failed institutions in a way that demonstrated that not only the insured depositors, but the uninsured depositors were also safe - and also by providing resources to banks all over the country to make sure they can meet the demands of their customers. The actions that 11 of the nation's biggest banks took to provide money to a smaller institution was another vote of confidence in the entire system. And what we're seeing now is that for small and regional banks, we've seen deposits stabilize and, in some situations, some of them actually increased their deposits, which is demonstrating that the actions that we've taken are working.

SIMON: Should people be nervous?

ADEYEMO: No, people should not be nervous. Ultimately, we've put in place robust reforms since the Dodd-Frank Act to make sure that our financial system is resilient. And the actions the government took last weekend, as well as the deposits placed in a smaller bank by the nation's 11 other banks, should demonstrate the deep belief in the resilience of the American banking system. The banks throughout our country, from community banks to regional banks to large banks, help provide credit to people that allow them to buy their homes and also to pay for small businesses. And that's going to continue going forward.

SIMON: What actions might the Treasury Department be in a position to take, however, if the situation continues to worsen?

ADEYEMO: Well, Scott, one of the things that I want to make sure that people realize is the situation has actually improved a great deal. Today in America, what we have seen is that the data is showing us that deposits have stabilized in our community banks and our regional banks and that, in some cases, those flows have actually reversed, and they're taking in assets. And this is because of the decisive actions that we've taken. And I think it's important to remember that the actions we took last weekend were taken rapidly, and they were taken in a way that means that if you are an American and you want to get money out of your bank, your bank is going to have access to the resources they need to provide that money to you because the federal government is providing them with those resources. And ultimately, we're going to remain vigilant. But people should be confident in the American banking system and our ability to make sure that those banks are used to meet the needs of Americans going forward.

SIMON: How do you react to the word bailout?

ADEYEMO: I think it's very clear that this wasn't a bailout. You go back to last weekend, where the government took over Silicon Valley Bank and Signature Bank because those institutions could no longer meet the needs of their customers. And the way that we did that was all of the executives were, of course, fired. All the investors in those institutions were also not allowed to collect on their investment.

What we did do, though, was we made sure that depositors, be they insured or uninsured, received their money from those financial institutions in order to make sure that they are best put in the position to pay for their bills, to help support their small business. And I think that's an example of the philosophical approach that we're taking, which is that we're not going to provide support to those who may have caused this or who took risk in investing in those institutions. We're going to make sure that the depositors, those people who have put their savings into these institutions, have the ability to get access to their resources.

SIMON: So you don't believe these banks are being rewarded for bad decisions?

ADEYEMO: No. If you invested in Silicon Valley Bank or you invested in Signature Bank, your money is gone. You have no commitment to receiving your money back. But if you were depositor in those institutions - let's say you're a small business. You're a grocery store. Or you're a family that deposited in those institutions. No matter the amount of the deposits, what the government has told you is that you are going to get your money back. That is not a bailout. And furthermore, the money you're getting back is not taxpayer dollars. As you all know, the FDIC has a fund that helps to support paying these resources. And the FDIC is ultimately going to use the resources of Signature Bank and of Silicon Valley Bank to reimburse each one of these depositors going forward so that no taxpayer money actually is used to make these payments.

SIMON: So, Mr. Deputy Secretary, can you assure somebody who, let's say, might want to put $500 in their bank next week, that that $500 plus interest will be there when they need it?

ADEYEMO: If you have $500 in the bank account and it's collecting interest, your $500 is safe in any bank here in America. And our goal is to make sure that we build a system in this country with regulations and rules that will ensure that going forward, banks are in a position where they can continue to do what banks are supposed to do, which is provide people with a place where they can safely put their money, but also provide people with a safe place where they can borrow from in order to build their businesses and buy homes and to help grow our economy.

SIMON: How confident are you that the U.S isn't on the verge of a recession?

ADEYEMO: When you look at the data from the last several months, you see that the U.S. economy continues to create hundreds of thousands of jobs. And part of my job is to talk to CEOs of big and small businesses around the country. And the No. 1 thing I hear from each one of them is that demand for their product or service remains strong. And the thing that they're all looking for is more employees. I'm confident that today, the U.S. economy is still growing, and I'm also confident that over time, we have the ability to grow this economy because of the investments we've made over the last two years of the president's administration.

SIMON: Deputy Treasury Secretary Wally Adeyemo, thanks so much for being with us.

ADEYEMO: Thank you for having me. Transcript provided by NPR, Copyright NPR.

Scott Simon is one of America's most admired writers and broadcasters. He is the host of Weekend Edition Saturday and is one of the hosts of NPR's morning news podcast Up First. He has reported from all fifty states, five continents, and ten wars, from El Salvador to Sarajevo to Afghanistan and Iraq. His books have chronicled character and characters, in war and peace, sports and art, tragedy and comedy.