Acting Comptroller Emphasizes Focus on Safe and Sound Banking System, Discusses Elevating Fairness in Banking

WASHINGTON—Acting Comptroller of the Currency Michael J. Hsu today emphasized the Office of the Comptroller of the Currency’s (OCC) continued focus on the safety, soundness and fairness of the federal banking system and its work to elevate fairness in banking in remarks at the National Community Reinvestment Coalition’s Just Economy Conference.

In his remarks, the Acting Comptroller highlighted the OCC’s close monitoring of the market and the condition of its supervised institutions. He discussed the OCC’s continued work to improve the fairness of bank overdraft protection practices by encouraging banks to make pro-consumer reforms. He also discussed efforts to address discrimination and bias in lending, appraisals and artificial intelligence, and the OCC’s focus on expanding inclusion and opportunity by strengthening and modernizing the Community Reinvestment Act and maturing Project REACh.

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Remarks by Secretary of the Treasury Janet L. Yellen at the National Association for Business Economics 39th Annual Economic Policy Conference

As Prepared for Delivery


Thank you. It’s a pleasure to be back at NABE. I want to first thank Julia for her kind introduction. And thank you to all of you for this honor.


I am especially privileged to receive a lifetime achievement award named after Paul Volcker – a titan in the field of economics. Paul may best be known for his work as Chairman of the Federal Reserve. But his legacy extends far beyond that role. Indeed, Treasury has a special claim to him too. Paul spent nearly a decade of his career working for our Department. As Under Secretary for Monetary Affairs, he shepherded our country’s transition from one monetary system to another – and with it, a change in America’s role in the global economy. Among the many posts in his long and varied career, Paul later called his role at Treasury “the best job in the world.” With apologies to my former Fed colleagues, we at Treasury take special pride in that.


In the last decade of his life, Paul also left an indelible mark on the field of financial stability. Paul was an outspoken champion for stronger regulation to prevent future financial crises. He led President Obama’s Economic Recovery Advisory Board, counseled the Administration on key changes to the financial architecture, and advocated firmly and publicly for the banking rule that bears his name.


Like Paul, and many of the economists here, I am no stranger to financial crises. My career has spanned almost two decades at the Fed, nearly three years at the Council of Economic Advisors, and over two years now at the Treasury Department. In that time, I have seen the U.S. and global financial systems undergo a number of significant disruptions: the Asian Financial Crisis, the dot-com crash, the Global Financial Crisis, and the COVID-19 market turmoil. I understand deeply the fear and uncertainty that these disruptions can cause. And I know well the longer-term pain that these disruptions can impose on American families and businesses when they are not decisively managed. These risks were top of mind as we took forceful and immediate actions earlier this month to contain the fallout from the failures of two regional banking institutions.


One constant across these disruptions has been a perennial debate about the proper role of government in regulating the financial sector. Waves of financial regulation have often been followed by concerted efforts at deregulation – premised on the belief that regulation is ineffective and stifles financial innovation and economic growth. I have lived through efforts like these, such as the massive pushback against the Dodd-Frank Act’s enactment and implementation. My response has always been that a stable and resilient financial system is not only compatible with responsible innovation and sustainable growth. In fact, it is a prerequisite for those goals.


Our prosperity depends on the work to safeguard financial stability before a crisis occurs – just as the implementation of a strong fire code can prevent a fire from breaking out. That work mattered in 2020, when a worldwide pandemic-driven “dash for cash” put extraordinary strain on the financial system. A decade of focused work to improve financial stability – coupled with forceful public-sector interventions – helped us avoid the worst possible economic outcomes. This work also mattered earlier this month, when we encountered two bank failures with a stronger financial system and hard-earned lessons from the Global Financial Crisis.


We have made much progress in the past 15 years. But recent events show that, clearly, our work is not done. During the COVID pandemic and again this month, the proverbial fire department had to be called – in the form of interventions by the Fed, FDIC, and Treasury. These events remind us of the urgent need to complete unfinished business: to finalize post-crisis reforms, consider whether deregulation may have gone too far, and repair the cracks in the regulatory perimeter that the recent shocks have revealed. We must also address new areas of risk.


Since my first day at Treasury, I have made it a major priority to restore and strengthen our financial stability apparatus. My remarks today will outline the importance of this work to the American economy. I will establish why financial stability matters to American families, before turning to how our financial system has performed through its most serious tests since the Global Financial Crisis. Then, I will speak about the progress that we’ve made on our financial stability agenda and the road ahead.


I. The Importance of Financial Stability


A. Why Financial Stability Matters for the Broader Economy


First, let’s start with a fundamental question: why care about financial stability in the first place?


Simply put, we care about financial stability because families and businesses benefit from a well-functioning financial system. Conversely, they bear the costs of its failures.


When the financial system works, it can be a powerful engine for economic growth. Financial institutions provide credit that enables families to afford homes, invest in education, and otherwise improve their standards of living. Borrowing helps business owners form new ventures and expand existing ones, leading to innovation and job creation. The financial system also gives families and businesses safe places to save, invest, and transact. At a broader level, it helps us efficiently allocate capital across the many productive uses in society.


But a fragile financial system can generate deep pain for American households when it fails. The Global Financial Crisis led to the longest recession in the postwar era. Over 8 million Americans lost their jobs. The net worth of U.S. households fell by over $10 trillion at the lowest point in the crisis. And the long-term unemployment rate did not recover for over a decade. Jorda, Schularick, and Taylor have found that recessions following financial crises are deeper than other downturns. The recoveries are slower too.1 One study put the price tag of lost output following the Global Financial Crisis at nearly a half to a full year of U.S. GDP. That’s the equivalent of $50,000 to $120,000 for every U.S. household.2 And the pain was not evenly distributed. Families in the bottom half of the distribution lost decades of gains in household wealth – while the top lost little.3


Studies show that weak financial systems can amplify business cycles. In a seminal 1999 paper, Bernanke, Gertler, and Gilchrist concluded that endogenous developments in credit markets can serve as a “financial accelerator.” That is, they can turn relatively small shocks into large fluctuations in aggregate economic activity – including more severe economic downturns.4 Nellie Liang, our Under Secretary for Domestic Finance, has produced with other scholars a helpful analytic approach called “growth at risk.”5 They conclude that loose financial conditions may support economic growth in the near-term. But that comes at the expense of increased downside risks in the medium term if loose conditions are accompanied by rapid credit growth.


B. The Rationale Behind Financial Stability Policies


The United States has an extensive history of federal financial regulation – one that dates back to the Civil War. Through much of the 20th century, regulators primarily focused on the safety and soundness of banks, along with investor protection and market integrity. But the Global Financial Crisis made clear that this focus was too narrow. Today’s financial system is characterized by increased complexity and interconnection across market actors and geographic boundaries. A single point of failure can cascade through the system like a wildfire – leading to a failure of the financial system to perform its core functions. In the aftermath of the Global Financial Crisis, the United States and many countries pursued new macroprudential policies designed to mitigate systemic risk.


Our goal as policymakers is to build a financial system that can provide core financial services in both good and bad times. Macroprudential policy is not aimed at preventing external shocks nor eliminating all volatility in the financial system. Rather, macroprudential policy aims to make the financial system more resilient to external shocks – so the system can dampen, not amplify, their consequences for American households and businesses. We also aim to prevent the financial system itself from becoming a source of shocks – like it was in 2008.


These policies are possible because financial crises share common elements with one another.


Let’s take the basic concept of fire sales. As described by Shleifer and Vishny, a fire sale is the forced sale of assets at a price below fundamental values.6 Building on this idea, Brunnermeier and Pedersen show how a negative shock to the net worth of collateralized borrowers can trigger a vicious cycle of forced asset sales.7 The resulting price declines trigger further forced sales. At each stage, the net worth of leveraged investors falls, requiring additional liquidations.


Of course, the concept of a fire sale is broader than the specific mechanism embodied in the Shleifer-Vishny or Brunnermeier-Pedersen models. Just as the original spark for a real fire can come from many sources, the trigger for systemic stress is often difficult to predict. But there are common vulnerabilities and transmission channels through which financial fires can get out of hand. Excessive leverage, especially when paired with maturity and liquidity mismatches, can increase the risk that fires spread out of control.


Information asymmetries can also lead to runs that have the potential to accelerate and deepen asset fire sales. This dynamic was highlighted in the research that won Diamond and Dybvig the Nobel Prize with Bernanke last year.8 Earlier this month, we saw one example of how dangerous these sorts of runs can be – as customers withdrew deposits from Silicon Valley Bank (SVB) and Signature Bank en masse.


The fire analogy should make the fundamental rationale for macroprudential financial regulation intuitively clear. Due to the externalities created by fires that can rage out of control, every community has both fire codes and fire departments. Fire departments are there to extinguish fires. But importantly, fire codes are there to prevent fires from starting and spreading in the first place.


II. The Post-GFC Financial System 


The Global Financial Crisis delivered a grave warning to the world about the risk of financial fires. So, we acted.


In the United States, Congress passed stricter fire codes in the form of stronger standards for systemically important banks, financial market utilities, and other firms. These reforms were designed to reduce their probability of failure and force them to internalize the cost of spillovers. Congress also created firebreaks between certain large firms and their neighbors, requiring them to plan for their own recovery and resolution. New smoke alarms were affixed to the financial system through the creation of the Office of Financial Research at the Treasury Department. That office was tasked with collecting financial data to help identify potential risks. And of course, there was a new fire marshal in town. Congress established the Financial Stability Oversight Council, or FSOC, to coordinate among agencies to identify and respond to emerging threats to U.S. financial stability.


We also knew that financial risks rarely respect national borders. In the years following the crisis, we built up the Financial Stability Board in partnership with other G20 members. We improved communication and coordination for stronger standards for financial stability policy, while also creating robust networks for responding to future crises.


Since then, our financial system has gone through a number of tests.


The biggest test came in March 2020 – just shy of a decade after the passage of Dodd-Frank. As the coronavirus spread rapidly across the world and governments issued stay-at-home orders, economic uncertainty and financial panic set in. What followed were historic selloffs in a broad range of financial assets – from equities to corporate and municipal bonds. Treasury yields rose as investors sought cash in this highly uncertain moment. The S&P 500 painted a clear picture of the panic. It tripped three circuit-breakers in the span of a week as the stock market recorded historic drops.


Over the past year, the financial system has gone through additional tests as financial conditions have tightened. Earlier this month, SVB failed to adequately account for interest rate risks and suffered a run accelerated by the bank’s outsized vulnerabilities. Its failure – along with that of Signature Bank – created a serious risk for contagious runs at other banks.


It is notable that neither of these events triggered the worst-case scenario – a financial meltdown like we saw in 2007 and 2008. In large part, this was due to the post-crisis reforms we put in place. But in both cases, the government had to deliver substantial interventions to ease the pressure on certain parts of the financial system.


This means that more work must be done.


Let me begin with the banking system. During the March 2020 panic, banks served as an important pillar of strength for the financial system. Large banks were better capitalized and more liquid than they were in 2007. Dodd-Frank imposed significant reforms designed to ensure these institutions could better absorb losses and meet customer demands for credit and cash.


But the failures of two regional banks this month demonstrate that our business is unfinished. To be clear, the banking system is significantly stronger than it was heading into the Global Financial Crisis. This is perhaps best illustrated by the fact that we’ve seen relative stability in the overall banking sector this month, even as concerns grew about specific institutions. Still, any time a bank fails, it is cause for serious concern. Regulatory requirements have been loosened in recent years. I believe it is appropriate to assess the impact of these deregulatory decisions and take any necessary actions in response.


We must also address vulnerabilities in the nonbank sector. Some nonbanks – or “shadow banks” – consist of financial companies that carry out traditional banking functions, but are outside of, or only loosely linked to, depository institutions. They have grown substantially in the past few decades. In the United States, credit provided by nonbanks – measured relative to GDP – has more than doubled from 1985 to today.9 This same measure has remained relatively flat for banks.


In many sectors, nonbanks have increased competition, fostered innovation, and broadened access to credit. But in March 2020, nonbanks and others pulled back from important credit markets. Extraordinary intervention by the government was necessary to stabilize these distressed markets and maintain a sufficient flow of credit to households and businesses. Put simply, the COVID shock reaffirmed the significance of structural vulnerabilities in nonbanks. Now, our duty as policymakers is to respond.


III. Progress on Unfinished Business


When the President and I took office in January 2021, we inherited a financial stability apparatus at Treasury that had been decimated. For example, I walked in to find an FSOC team that was less than one third of the size it was five years prior. In 2016, FSOC’s policy, analysis, and operations teams were fully staffed. By 2021, the analysis team had been eliminated. This team, working with financial regulators, was responsible for helping monitor systemic risk. This meant that we went into the pandemic crisis without the staffing we needed to monitor risks to the health of the financial system.


Over the past two years, I have made it a top priority to rebuild the financial stability infrastructure at Treasury. We have doubled the size of our FSOC staff, with plans to accelerate hiring in the coming months. Importantly, we have recommitted to our partnership with regulators to make progress on our financial stability agenda.


Let me start with our work on the banking system, before turning to nonbanks.


A. Banks


Federal regulators are in the process of reviewing events surrounding the failure of SVB. It’s important that I don’t prejudge the conclusions of their inquiry. So let me focus instead on our response to the situation that we encountered.


Earlier this month, we learned about a situation at SVB that required immediate action. The institution was experiencing a classic Diamond-Dybvig bank run – fueled by uncertainty about the value of its assets. This run was accelerated by unique features of SVB’s deposit base. The bank’s depositors were highly correlated, and an unusually high share of its deposits was uninsured. Withdrawals were occurring at a remarkable speed.


Faced with this run, the federal government took decisive action to restore and strengthen public confidence in the U.S. banking system. Treasury worked with the Fed and FDIC to protect depositors in the resolution of SVB. We also took the same action for Signature Bank – another institution that faced a run at around the same time. This meant that all customers at SVB and Signature Bank received access to their insured and uninsured deposits almost immediately. To be clear, the steps we took were not focused on aiding specific banks or customers. Our intervention was necessary to mitigate systemic risks and protect the broader U.S. banking system. We also took these actions without protecting the banks’ investors or managers. In addition to these specific actions, the Fed established a new lending facility to provide additional liquidity to the banking system.


Today, the U.S. banking system is sound, even as it has come under pressure. The new Fed facility and discount window lending are working as intended to help banks meet the needs of all of their depositors. The capital and liquidity positions of the overall system remain at strong levels. And as we continue to monitor conditions, let me be clear: this month’s developments have been very different than those of the Global Financial Crisis. Back then, many financial institutions came under stress due to their holdings of subprime assets. We do not see that situation in the banking system today.


Even in a well-regulated system, public confidence is key. When there are cracks in confidence in the banking system, the government must act immediately. This includes making forceful interventions – like we did. As I have said, we have used important tools to act quickly to prevent contagion. And they are tools we could use again. The strong actions we have taken ensure that Americans’ deposits are safe. And we would be prepared to take additional actions if warranted.


It’s also important that we reexamine whether our current supervisory and regulatory regimes are adequate for the risks that banks face today. We must act to address these risks if necessary. Regulation imposes costs on firms, just like fire codes do for property owners. But the costs of proper regulation pale in comparison to the tragic costs of financial crises.


Our Administration is committed to making sure that the U.S. banking system remains the strongest and safest in the world. As we consider next steps, it is vital that we ensure the health and competitiveness of our vibrant community and regional banking institutions. The American economy benefits enormously from our broad and diverse banking system.


B. Nonbanks: Money Market and Open-End Funds


As we strengthen the banking sector, we are also making progress on one of FSOC’s top priorities: mitigating vulnerabilities in nonbank financial intermediation. Many of these nonbank institutions engage in liquidity and maturity transformation: they profit by issuing short-term obligations while investing in riskier and longer-term assets. But they are generally not regulated to account for spillovers to the rest of the financial system during times of extreme stress.


There are two guiding principles in our work on nonbanks. First, policymakers should address risks regardless of where they emanate from. Substance is more important than form; similar activities that create comparable financial stability risks should be subject to comparable regulatory scrutiny. Second, policymakers should adapt and tailor policies to fit the unique structural features of the institutions and markets they are regulating. For example, systemic liquidity risks should be addressed wherever they exist. But specific policy responses should differ depending on the specific activity involved.


These principles prevent risks from shifting around in the financial system in response to regulation. They enable us to address risks wherever they are found.


We have pursued work on nonbanks that are both inside and outside the traditional financial system. First, let me speak on nonbanks inside the traditional system.


If there is any place where the vulnerabilities of the system to runs and fire sales have been clear-cut, it is money market funds. These funds are widely used by retail and institutional investors for cash management; they provide a close substitute for bank deposits. Before the post-crisis reforms implemented by the SEC, all money market funds were generally expected to maintain a fixed $1 net asset value per share. The stable NAV was normally achievable because funds were generally limited to investments that were considered to be low risk. These funds were allowed to round their share prices to $1 when the market value of their investments fell – as long as it stayed above a certain level. But a fund had to respond if its market value fell below that level – that is, if it “broke the buck.” In that case, these funds would have to reprice, and they might cease withdrawals and liquidate their assets.10


This created an incentive for a run in times of extreme stress. The first redeemers could exit the fund at $1 per share, but those who waited might be subject to a reduced market value as they are left with claims on less-liquid assets. This created a “first-mover advantage” – an incentive for investors to redeem at the whiff of a problem. During the Global Financial Crisis, anticipated losses on Lehman Brothers commercial paper led to a run on the $62 billion Reserve Primary Fund, the oldest money market fund in the nation. Concerns about Lehman then sparked concerns about commercial paper issued by other banks. This led to runs on other money market funds. A post-mortem report revealed that as many as 28 other funds had NAVs low enough for them to also break the buck.11


Even without a fixed NAV, liquidity mismatch in other kinds of funds can still make them vulnerable to runs and fire sales. Open-end funds offer daily redemptions, but some hold assets that cannot be sold quickly – particularly in large volumes. Like money market funds, this liquidity mismatch does not typically pose problems in normal times when flows to and from funds are not outsized. But in times of market stress, shareholders are incentivized to redeem early – before fire sales of illiquid assets lower the value of their holdings. Driven by this dynamic amid the pandemic shock, a record $255 billion flowed out of bond mutual funds in March 2020.12


The structural vulnerabilities at the heart of money market and open-end funds aren’t new. In the banking sector, capital and liquidity requirements and federal deposit insurance reduce the likelihood of runs taking place. In case runs occur, access to the discount window helps provide buffers for banks. Yet the financial stability risks posed by money market and open-end funds have not been sufficiently addressed.


Over the past two years, the SEC has proposed rules to mitigate the vulnerabilities plaguing these funds.13 The SEC’s proposals would reduce the first-mover advantage, reducing run incentives during times of stress. They would also require new liquidity management tools, while mandating more comprehensive and timely information on these funds for the SEC and investors.


Abroad, Treasury has worked with the FSB to advance international commitments that enhance the resilience of money market funds. We will soon review the implementation – and later the effectiveness – of reforms taken by member jurisdictions. Treasury is also working diligently in the FSB to revise recommendations on liquidity management in open-end funds to bolster their resilience.


C. Nonbanks: Hedge Funds


We’ve also been focused on mitigating systemic risks from the use of leverage at hedge funds and other similar funds.


The hedge fund industry has expanded significantly over the last five years. In 2021, gross assets reached almost $10 trillion, up more than 50 percent since 2016.14 Hedge funds are also playing a more prominent role in markets that lie at the core of the financial system – like the U.S. Treasury market.


Overall use of leverage among hedge funds is fairly small on average. But leverage appears to be concentrated among a select number of large hedge funds. Twenty-five funds account for around half of all hedge fund borrowing and derivatives exposures.15 Further, funds with certain strategies are engaged in very significant use of leverage.


Leverage can support economic growth, but excessive leverage is dangerous. It can add fuel to fire sales by triggering a negative spiral of margin calls and rapid asset liquidations. These fire sales can transmit stress to hedge fund counterparties and other market participants – including large, systemic banks. Post-crisis banking regulations have helped reduce the potential of spillovers to the banking system. But spillovers from these fire sales to other market participants remain a risk.


In March 2020, these risks became reality. For example, hedge funds were among the top three sellers of Treasury securities that month. FSOC has determined that they materially contributed to Treasury market dysfunction.16


We’ve taken a number of actions to address financial stability risks due to leverage.


First, we restored FSOC’s Hedge Fund Working Group, which had previously been disbanded. No single regulator has the authority or information to comprehensively assess the risks posed by hedge funds. So, the working group has developed a risk monitoring framework to identify hedge fund-related risks to the financial system. The framework is based on data from the SEC’s Form PF, which was initiated after the financial crisis, as well as supervisory information from relevant agencies. This group reports regularly to FSOC and will develop policy recommendations – if it is determined that leverage or other vulnerabilities are significantly increasing financial stability risks. 


Second, Treasury’s Office of Financial Research will continue to enhance data collection on bilateral repo transactions without a central counterparty. These are a key source of leverage for hedge funds. This collection will also help to close a large remaining gap for Treasury market data. And it will be important for Treasury’s broader efforts to advance reforms with financial regulators that improve the resilience of the Treasury market, which has seen some episodes of stress in recent years.17


D. Nonbanks: Digital Assets


A comprehensive financial stability program must also limit vulnerabilities from non-traditional financial products.


New technologies have the potential to provide faster, safer, and cheaper financial services. They can also foster greater financial inclusion. But as we’ve learned from history, innovation without adequate regulation can result in significant disruptions and harm.


Over the past decade, the digital assets ecosystem has grown significantly in scope and scale. It has also been subject to significant shocks and volatility. In November 2021, global market capitalization reached approximately $3 trillion.18 Just over half a year later, it lost two-thirds of its value – and has not markedly recovered since then.


We have been vigilant in monitoring the potential systemic risks of digital assets since before the collapse of FTX and other platforms. In 2021, the President’s Working Group on Financial Markets issued recommendations for stablecoin regulation. And last year, Treasury and other agencies released a series of reports on digital assets policy in response to an executive order by President Biden. Out of this effort, we identified areas of further work and coordination among the financial agencies, as well as gaps in existing authority that would require legislation. 


Take the example of stablecoins. Today, stablecoins are frequently used to pay for speculative crypto-assets. But they could be used more widely for payments for other goods and services. After all, stablecoins are designed specifically with the goal of maintaining a stable value. Typically, that is one-to-one with the U.S. dollar. The largest stablecoins seek to maintain this peg by backing the coin with a pool of reserve assets.


This structure creates the same kinds of run incentives that we see in the traditional financial system. Stablecoin holders often have a “first-mover advantage” to redeem in times of stress – before conditions deteriorate further, fire sales become necessary, and the value of reserve holdings fall. As we saw in 2008 and 2020, runs and fire sales can spread like a contagion. A run on one stablecoin can lead to panicked runs on other stablecoins – causing even broader selloffs.


Given these parallels, we have recommended that Congress enact legislation to establish a comprehensive prudential regulatory framework for stablecoin issuers. Such a framework would include consolidated federal supervision, requirements for how a coin could be backed, capital and liquidity requirements, and restrictions on affiliation with commercial companies.


In addition to stablecoins, we must identify and fill gaps in existing authority for the oversight of other crypto-assets – including those identified in the FSOC digital assets report. We have existing consumer and investor protection standards in traditional financial markets. These same principles and protections should apply in markets for crypto-assets.


Finally, we are also working to address risks specific to digital assets. This includes risks associated with vertical integration of crypto-trading platforms and lack of visibility into the operations of subsidiaries and other entities across these businesses. And we are also exploring broader policy issues around the future of money and payments – including the possibility of a central bank digital currency.


IV. Debt Limit


I’d be remiss if I did not end by speaking about one of the most important short-term actions that Congress can take to safeguard our financial stability: to raise or suspend the debt limit.


Since 1789, the United States has paid all of our bills on time. It should stay that way. In my assessment – and that of economists across the board – a default on our obligations would cause an economic and financial catastrophe. No financial system is designed or regulated to be prepared for its own government to choose not to pay its bills. A breach of the debt ceiling could lead to a prolonged downturn and a global financial crisis. And it could upend the lives of millions of Americans and those around the world.19


This catastrophe is preventable. Congress must raise or suspend the debt limit. It should do so without conditions – and without waiting until the last minute.


V. Conclusion


To end, I will note that our work is not yet done. That much was clear from the events earlier this month.


Financial stability is a public good. Government plays a fundamental role in the provision of financial stability, as the costs of systemic failure are externalized to the broader society.


At Treasury, we take this responsibility very seriously. Today, I’ve touched on select areas of our work. But our financial stability efforts extend to areas from cybersecurity to climate-related financial risks.


As we chart a path forward, let me reflect on the contributions of the economics profession to this endeavor. In one of his most famous passages from “The General Theory,” John Maynard Keynes wrote that “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.”


There is perhaps no better testament to this sentiment than the emergence of the field of financial stability. Early economists who studied systemic risk informed the views of the first responders – those who remarkably stopped a financial meltdown mid-stream in the fall of 2008. In 2020, financial regulators in the U.S. and around the world leaned on post-crisis reforms and intervened decisively to avoid a similar meltdown. Their work was made possible by the explosion of research in this area over the preceding decade.


We should celebrate these developments as a collective contribution of our economics profession – just as the Keynesian explanation for recessions and depressions was an accomplishment of our profession in the mid-20th century. It is time to continue this work anew.


My pledge to you is that I will continue to lead on the crucial work of financial stability at Treasury. And I hope you will be our partners as we continue to build a financial system that works for the American people.


Thank you so much for this honor.


Treasury Sanctions Facilitator for Attempted Arms Deals Between North Korea and Russia

WASHINGTON — Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned one individual for attempting to facilitate arms deals between Russia and the Democratic People’s Republic of Korea (DPRK). Sanctions and export controls imposed by a coalition of over 30 countries have constrained Russia’s ability to replace lost military equipment and supplies with modern technology. At the same time, the United States and its partners are continuing to provide Ukraine with advanced weapons to defend itself against Russia’s brutal war of choice.

“Russia has lost over 9,000 pieces of heavy military equipment since the start of the war, and thanks in part to multilateral sanctions and export controls, Putin has become increasingly desperate to replace them,” said Secretary of the Treasury Janet L. Yellen. “Schemes like the arms deal pursued by this individual show that Putin is turning to suppliers of last resort like Iran and the DPRK. We remain committed to degrading Russia’s military-industrial capabilities, as well as exposing and countering Russian attempts to evade sanctions and obtain military equipment from the DPRK or any other state that is prepared to support its war in Ukraine.”


OFAC is designating a Slovakian national Ashot Mkrtychev (Mkrtychev) pursuant to Executive Order (E.O.) 13551 for having attempted to, directly or indirectly, import, export, or reexport to, into, or from the DPRK any arms or related materiel. 

Between the end of 2022 and early 2023, Mkrtychev worked with DPRK officials to obtain over two dozen kinds of weapons and munitions for Russia in exchange for materials ranging from commercial aircraft, raw materials, and commodities to be sent to the DPRK. Mkrtychev’s negotiations with DPRK and Russian officials detailed mutually beneficial cooperation between North Korea and Russia to include financial payments and barter arrangements. He confirmed Russia’s readiness to receive military equipment from the DPRK with senior Russian officials. Mkrtychev’s negotiations with those officials indicated that necessary Russian preparations for a proposed deal were complete, and that they were ready to receive materials from and transfer materials to the DPRK. He also provided DPRK officials with information from Russian officials, likely connected to his attempts to obtain military equipment for Russia from DPRK. Lastly, Mkrtychev worked with a Russian individual to locate commercial aircraft suitable for delivery to the DPRK.


As a result of today’s action, pursuant to E.O. 13551, all property and interests in property of the person named above that are in the United States, or in the possession or control of U.S. persons, are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked person are also blocked. 

In addition, persons that engage in certain transactions with the individual designated today may themselves be exposed to designation. Furthermore, any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for the individual designated today could be subject to U.S. correspondent or payable-through account sanctions. 

The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the Specially Designated Nationals and Blocked Persons (SDN) List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior. For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897

For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.

Find identifying information on the individual sanctioned today here.


Remarks by Secretary of the Treasury Janet L Yellen at Federal Advisory Committee on Insurance Meeting

As Prepared for Delivery

Good afternoon, everyone. I’m glad to be with you today. I want to first welcome John as chair of the Federal Advisory Committee on Insurance. Let me also thank Dan for his tremendous service as this Committee’s past chair. 

I wanted to join you today to thank you for all that you do on this Committee. 

For over a decade, the Federal Insurance Office – FIO has been critical to monitoring and assessing the financial health of the insurance industry. A broad and diverse set of outside perspectives is important to any endeavor we undertake here at Treasury. But it is particularly important for FIO’s broad statutory mandate. This office is in charge of monitoring an industry with over $2.5 trillion in written premiums, over $11 trillion in total assets, and thousands of licensed insurers – and one that provides services and products that are crucial for households and businesses. Over the years, FIO has benefited from your expertise in areas from pandemic preparedness to protecting Americans’ retirement security to international market access. 

You have also been indispensable in providing advice on one of FIO’s main priorities this year: improving our understanding of climate-related financial risks in the insurance industry.

The Financial Stability Oversight Council identified climate change as an emerging threat to U.S. financial stability in October 2021. Climate change poses various risks to our financial system. A major one is physical risk: the harm to people and property that arises from acute disaster events like hurricanes, floods, and wildfires – as well as more chronic phenomena like warming temperatures. We’ve already seen an acceleration of these physical risks in the United States. There’s been at least a five-fold increase in the annual number of billion-dollar disasters in the past five years as compared to the 1980s – even after adjusting for inflation. Notably, in 2022, Hurricane Ian caused at least 157 deaths and almost $100 billion in damages. 

There is growing evidence that these trends in physical risks have led to a decline in the availability and affordability of insurance in certain areas. We’ve seen insurers in states like California, Florida, and Louisiana raise rates or pull back from high-risk areas in response to rising insured losses. And we know that insurance may be especially difficult to find in traditionally underserved communities. According to one source, in 2022, insurance covered only 60 percent of $165 billion in total economic losses from climate-related disasters. This “protection gap” may indicate that Americans are facing challenges in finding available and affordable insurance in their area. This can have significant consequences for homeowners and the values of their assets. In turn, these developments can have cascading effects on the financial system. 

In October 2022, FIO issued a proposed data collection from certain property and casualty insurers on their current and historical underwriting data on homeowner’s insurance. The aim is to gather consistent and granular data – down to the zip code level – that can help provide a nationwide understanding of the availability and affordability of insurance. It will help us assess how insurance coverage is being affected by climate-related risks. This would be the first-ever quantitative assessment of its kind. 

This data collection would build on the other steps that FIO has taken in the past 18 months to bolster its climate work. That includes ramping up its engagement with the insurance sector domestically and internationally. It also includes producing an upcoming report that will focus on assessing climate-related issues or gaps in the supervision and regulation of insurers. 

FIO has benefited greatly from this Committee’s significant expertise – particularly that of the Climate-Related Financial Risk Subcommittee. And we will continue to do so. We know that many stakeholders have submitted public comments in response to FIO’s proposed data collection. We look forward to continued engagement with stakeholders, as well as this Committee, as we advance this work.  

I want to end by thanking you again for your service. Not only on climate-related work, but across all of FIO’s priorities. The work that you are doing as part of this Committee is crucial to bolstering the health of the U.S. financial system. 

I’m deeply grateful for your time and efforts.

Thank you.



Testimony of Secretary of the Treasury Janet L. Yellen Before the State, Foreign Operations, and Related Programs Appropriations Subcommittee, U.S. House

As Prepared for Delivery

Chairman Diaz-Balart and Congresswoman Meng: thank you for inviting me to join you today. I would also like to thank you for your leadership and support of the Treasury Department’s international programs.

Over the past two years, the world has faced serious global challenges. Thanks to the support you have provided, Treasury has strengthened U.S. leadership of the global economic system and advanced our national interests. We have led the world in our efforts to combat the global pandemic and prepare for future ones. We have made critical investments to build a more resilient food security ecosystem and mobilize the world to combat and adapt to a changing climate. And there is perhaps no place where our impact is felt more acutely than in Kyiv. In my trip to Ukraine last month, I heard personally about how our coalition’s work has enabled Ukraine to defend itself against a brutal and illegal assault by Russia. 

We take these actions not out of charity – but because they are in our economic and national security interests. As I’ve said before, in today’s world, no country alone can suitably provide a strong and sustainable economy for its people. That’s why our Administration is restoring and strengthening America’s standing in the world.

The President’s FY 2024 Budget advances our nation’s international priorities. Let me speak to the two pillars of our request.

First, we request $2.3 billion for the multilateral development banks. These banks promote resilient and inclusive economic growth across the world. They also support countries recovering from disaster and conflict. Importantly, these banks offer nations a sustainable, high-quality alternative to non-transparent sources of borrowing. Over the past three years, for example, the World Bank has provided 48 million people with access to clean water. And it has connected over 500 million people with essential health and nutrition services. The development banks have also been on the frontlines of the response to two major challenges we have faced: COVID and Russia’s war against Ukraine. 

Over the next few months, you will see the World Bank undergo an important transition. We expect that Ajay Banga – President Biden’s nominee – will be elected President of the World Bank. He will be charged with accelerating our progress to evolve the institution to better address 21st century challenges. This evolution will help the Bank deliver on its vital poverty alleviation and development goals. Our budget request enhances U.S. leadership of the World Bank at this critical juncture.

Beyond the World Bank, the President’s Budget also supports other development banks that provide critical assistance to highly vulnerable low-income and middle-income countries. 

The second pillar of our request is for specific multilateral funds that help deliver on our nation’s core priorities.

Food and energy security is a core focus. The President’s Budget requests $122 million for food security programs. These initiatives not only mitigate hunger around the world, they also help grow the global supply of food that Americans depend on. As an example, since 2010, the Global Agriculture and Food Security Program has pooled more than $2 billion to improve food and nutrition security for millions of people. 

The budget also requests about $1.4 billion to promote energy security and resilience. It funds programs like the Clean Technology Fund, which advances large-scale, transformational clean technology projects in major emerging economies. The budget also requests $800 million from Treasury for the Green Climate Fund, in addition to the same amount from the Department of State. We deploy our public funds effectively. As an example, we mobilize an average of $3.40 in private co-finance for every dollar invested by the Clean Technology Fund program. 

We also request funding for our debt relief and restructuring efforts. This comes at a moment when about half of all low-income countries are in or near debt distress. We are asking for $52 million for multilateral debt initiatives, which will help us avoid delays in urgently needed debt treatments. We are also requesting $45 million for Treasury’s Office of Technical Assistance, which helps low-income countries responsibly manage their government finances.

Thank you again for your support of Treasury’s international programs, and for your partnership in strengthening U.S. leadership in the world. I’m happy to take your questions.


Treasury Department Announces New York’s Capital Projects Fund Award, Connecting 100,000 Low-Income Housing Units to Affordable, High-Speed Internet As Part of President Biden’s Investing in America Agenda

Combined with other Administration initiatives, President Biden’s Investing in America agenda has brought affordable internet to over 16 million American households

WASHINGTON — Today, the U.S. Department of the Treasury announced the approval of high-speed internet projects in New York under the American Rescue Plan’s Capital Projects Fund, part of President Biden’s Investing in America agenda. The state will use its funding to connect nearly 100,000 low-income housing units to affordable, high-speed internet. A key priority of the Capital Projects Fund program is making funding available for reliable, affordable high-speed broadband infrastructure, advancing President Biden’s goal of affordable, reliable, high-speed internet for everyone in America. Already, President Biden’s Investing in America agenda has delivered affordable high-speed internet to 16 million American households, through the Capital Projects Fund and through the Affordable Connectivity Program funded by the Bipartisan Infrastructure Law, saving each household at least $30 per month and supporting one of the strongest and fastest economic recovery in history.

“The pandemic upended life as we knew it and exposed the stark inequity in access to affordable and reliable high-speed internet in communities across the country, including rural, Tribal, and other underrepresented communities,” said Deputy Secretary Wally Adeyemo. “This funding is a key piece of the Biden-Harris Administration’s historic investments to increase access to high-speed internet for millions of Americans and provide more opportunities to fully participate and compete in the 21st century economy.”

“$100 Million in federal funding that I secured in the American Rescue Plan is now on its way to boost high quality internet access for over 100,000 families and homes across New York. Long before the pandemic, communities across New York, from rural communities to bustling city neighborhoods, have struggled to obtain affordable, high-speed internet service,” said Senator Schumer. “These federal dollars will go directly towards closing the digital divide, which means connecting communities to good-paying jobs, better healthcare, and higher-quality education in our schools. I am proud to deliver this major $100 million investment to provide more equitable broadband accessibility throughout the state and help New Yorkers thrive in today’s digital economy.”

“I am proud to announce $100 million in federal funding that will be used to deliver high-speed internet to thousands upon thousands of families across New York State,” said Senator Gillibrand. “During the pandemic, we saw how important high-quality broadband is for business, health care, school, and more. That’s why, when we wrote the American Rescue Plan, we included robust funding for broadband delivery, which can create new economic opportunities, raise property values and improve people’s life and health outcomes. I’m excited to work with the White House, Leader Schumer and Governor Hochul to get this project moving.”

“Affordable, reliable broadband access is essential to connect New Yorkers with work, education, and government services, but still out of reach for far too many families,” said Governor Hochul. “This critical funding to unlock high-speed internet for thousands of New York renters will build on the success of our ConnectALL broadband initiative while supporting the goals our five-year plan to build and preserve more affordable housing. Thanks to the Biden administration and New York’s Senate and Congressional delegations, New York will continue to lead the nation in bridging the digital divide and making broadband available to all.”

The Capital Projects Fund (CPF) provides $10 billion to states, territories, freely associated states, and Tribal governments to fund critical capital projects that enable work, education, and health monitoring in response to the public health emergency. In addition to the $10 billion provided by the CPF, many governments are using a portion of their State and Local Fiscal Recovery Funds (SLFRF) toward meeting the Biden-Harris Administration’s goal of connecting every American household to affordable, reliable high-speed internet. Together, these American Rescue Plan programs and the Bipartisan Infrastructure Law are working in tandem to close the digital divide – deploying high-speed internet to those without access and lowering costs for those who cannot afford it.

New York is approved to receive $100 million for high-speed internet infrastructure, which the state estimates will connect roughly 100,000 households and businesses to high-speed internet access. New York’s award will fund the state’s Affordable Housing Connectivity Program, a competitive grant program designed to fund high-speed, reliable broadband infrastructure to and within low-income housing buildings. CPF funds will be used to upgrade internet access in affordable housing units. The plan submitted to Treasury and being approved today represents 29% of the state’s total allocation under the Capital Project Funds program. New York submitted plans for the remainder of their Capital Project Funds and these applications are currently under review by Treasury.

In accordance with Treasury’s guidance, each state’s plan requires service providers to participate in the Federal Communications Commission’s (FCC) new Affordable Connectivity Program (ACP). The Affordable Connectivity Program, funded by President Biden’s Bipartisan Infrastructure Law, helps ensure that households can afford the high-speed internet by providing a discount of up to $30 per month (or up to $75 per eligible household on Tribal lands). Experts estimate that nearly 40% of U.S. households are eligible for the program.

To further lower costs, President Biden and Vice President Harris announced last year that the Administration had secured commitments from 20 leading internet service providers—covering more than 80% of the U.S. population—to offer all ACP-eligible households high-speed, high-quality internet plans for no more than $30 per month. As a result of this agreement and the ACP, eligible households can receive internet access at no cost and can check their eligibility and sign up at

Treasury began announcing state awards in June of last year. To date, 37 states have been approved to invest approximately $5.2 billion of Capital Project Funds in affordable, reliable high-speed internet, which those states estimate will reach more than 1.58 million locations. Treasury will continue approving state and Tribal plans on a rolling basis.

Click here to view the Capital Project Fund Award Fact Sheet for New York.


TSX Delisting Review – Taiga Motors Corporation (TAIG, TAIG.WT)

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Treasury Sanctions Syrian Regime and Lebanese Actors Involved in Illicit Drug Production and Trafficking

Action taken in Coordination with the United Kingdom

WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took action in coordination with counterparts in the United Kingdom to designate key individuals supporting the regime of Syrian President Bashar al-Assad (al-Assad) and the production or export of Captagon, a dangerous amphetamine. The trade in Captagon is estimated to have become a billion-dollar illicit enterprise. These designations, some of which are being implemented pursuant to the Caesar Syrian Civilian Protection Act of 2019 (“Caesar Act”), also highlight the important role of Lebanese drug traffickers — some of whom maintain ties to Hizballah — in facilitating the export of Captagon. This action also underscores the al-Assad family dominance of illicit Captagon trafficking and its funding for the oppressive Syrian regime.

“Syria has become a global leader in the production of highly addictive Captagon, much of which is trafficked through Lebanon,” said OFAC Director Andrea M. Gacki. “With our allies, we will hold accountable those who support Bashar al-Assad’s regime with illicit drug revenue and other financial means that enable the regime’s continued repression of the Syrian people.”

Today’s designations are being taken pursuant to Executive Order (E.O.) 13572 of April 29, 2011, “Blocking Property of Certain Persons With Respect to Human Rights Abuses in Syria”; E.O. 13582 of August 17, 2011, “Blocking Property of the Government of Syria and Prohibiting Certain Transactions With Respect to Syria”; the Caesar Act; and E.O. 13224 of September 23, 2001, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism,” as amended.


Khalid Qaddour (Qaddour) is a Syrian businessman and close associate of Maher al-Assad, who was designated under E.O. 13572 in 2011 in connection with his role in the Government of Syria’s (GoS) ongoing human rights abuses against the Syrian people. Maher al-Assad is the head of the notorious U.S.-designated Fourth Division of the Syrian Arab Army (SAA). He is also the brother of Syrian President al-Assad, who was designated in 2011 pursuant to E.O. 13573 for his leading role in the escalation of violence by the GoS against its population. Maher al-Assad and the Fourth Division are known to run many illicit revenue-generation schemes, which range from smuggling cigarettes and mobile phones to facilitating the production and trafficking of Captagon. It is reportedly Qaddour who is responsible for managing revenues generated by these activities. The Syrian regime and its allies have increasingly embraced the production and trafficking of Captagon to generate hard currency, estimated by some to be in the billions of dollars.

Qaddour is being designated pursuant to E.O. 13572 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Maher al-Assad. Qaddour is also being designated pursuant the Caesar Act for being a foreign person that knowingly provides significant financial, material, or technological support to, or knowingly engages in a significant transaction with, Maher al-Assad.

Samer Kamal al-Assad (Samer) is a cousin of President al-Assad and oversees key Captagon production facilities in regime-controlled Latakia, Syria, in coordination with the Fourth Division and certain associates of Hizballah. In 2020, 84 million Captagon pills produced at a factory owned by Samer in Lattakia, Syria, worth an estimated $1.2 billion were seized at the Italian port of Salerno. Samer reportedly also owns a factory producing Captagon in the Qalamoun region near the Syria-Lebanon border.

Samer is being designated pursuant to E.O. 13582 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the GoS. Samer is also being designated pursuant the Caesar Act for being a foreign person that knowingly provides significant financial, material, or technological support to, or knowingly engages in a significant transaction with, the GoS.

Wassim Badi al-Assad (Wassim), another cousin of President al-Assad, has supported the SAA in various roles, to include leading the Ba’ath Brigades militia, a paramilitary unit under the Syrian Arab Army’s command. He has publicly called for the formation of sectarian militias to support the regime. Wassim has been a key figure in the regional drug trafficking network, partnering with high-level suppliers to smuggle contraband, Captagon, and other drugs throughout the region, with tacit support of the Syrian regime.

Wassim is being designated pursuant to E.O. 13582 for having acted or purported to act for or on behalf of, directly or indirectly, the Syrian Arab Army.

Imad Abu Zureik (Zureik), a former Free Syrian Army commander who now leads a Syrian Military Intelligence (SMI)-affiliated militia, has played an important role enabling drug production and smuggling in southern Syria. With the approval of the U.S.-designated SMI, Zureik leads a militia group controlling the crucial Nassib border crossing between Syria and Jordan. Zureik uses his power over the area to sell contraband, operate protection rackets, and smuggle drugs in Jordan, while also recruiting directly for the SMI.

Zureik is being designated pursuant to E.O. 13572 for having acted or purported to act for or on behalf of, directly or indirectly, the SMI.


Hassan Muhammad Daqqou (Daqqou) is a Lebanese-Syrian dual national dubbed by media as “The King of Captagon.” Daqqou has been linked to drug trafficking operations carried out by the SAA’s Fourth Division, directed by Maher al-Assad, and with cover reportedly provided by Hizballah. He was arrested in Lebanon in 2021 on drug trafficking charges associated with a massive shipment of Captagon interdicted in Malaysia on its way to Saudi Arabia, though Hizballah affiliates have reportedly facilitated Daqqou’s ability to continue to run his businesses while he was in prison. Daqqou developed a reputation as a source for Captagon and facilitator of smuggling across the Syria-Lebanon border under the protection of Hizballah associates.

Daqqou is being designated pursuant to E.O. 13224, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Hizballah.

Hassan Daqqou Trading and Al-Israa Establishment for Import and Export are two companies specializing in general trade and import-export operations that are registered under Daqqou’s name in the Beka’a Valley region of Lebanon. Hassan Daqqou Trading and Al-Israa Establishment for Import and Export are being designated pursuant to E.O. 13224, as amended, for being owned, controlled, or directed by, directly or indirectly, Daqqou.

Noah Zaitar (Zaitar) is a Lebanese national with close ties to both the SAA’s Fourth Division and certain members of Hizballah. Zaitar is a known arms dealer and drug smuggler and is currently wanted by the Lebanese authorities for drug trafficking. Zaitar reportedly conducts his illicit activities under the protection of the Fourth Division.

Zaitar is being designated pursuant to E.O. 13224, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Hizballah.


As a result of today’s action, all property and interests in property of these persons that are in or come within the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. OFAC regulations generally prohibit all dealings by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of designated or otherwise blocked persons.

In addition, persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action. Furthermore, any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the targets designated today pursuant to E.O. 13224, as amended, could be subject to U.S. sanctions.

The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the Specially Designated Nationals and Blocked Persons List (SDN List), but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish but rather to bring about a positive change in behavior. For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897. For detailed information on the process to submit a request for removal from an OFAC sanctions list, please refer to OFAC’s website.

View identifying information on the individuals and entities designated today.



Testimony of Under Secretary for Domestic Finance Nellie Liang Before the Committee on Banking, U.S. Senate

As Prepared for Delivery

Chairman Brown, Ranking Member Scott, and other members of the Committee, thank you for inviting me to testify today.   

I have had the opportunity to speak with committee members several times in recent days to share updates from Treasury regarding current events. In light of that, I will keep my introductory remarks brief.

The American economy relies on a healthy banking system – one that includes large, small and mid-size banks and provides for the financial needs of families, businesses, and local communities.  Households depend on banks to finance their cars and homes and build their savings.  Businesses borrow from banks to start and expand their operations, creating jobs for American workers and benefits for their local economies.

Nearly three weeks ago, problems emerged at two banks with the potential for immediate and significant impacts on the broader banking system and the economy. The situation demanded a swift response.  In the days that followed, the federal government took decisive actions to strengthen public confidence in the U.S. banking system and protect the American economy.

On March 9th, depositors of Silicon Valley Bank (SVB), withdrew $42 billion in deposits in a period of just a few hours.  After concluding that significant deposit withdrawals would continue the next day, the California state regulator closed SVB and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver on March 10th. Two days later, on Sunday March 12th, the New York regulator closed Signature Bank, which also had experienced a depositor run, and appointed the FDIC as receiver.

Treasury worked to assess the effects of these failures on the broader banking system, consulting regularly with the Federal Reserve and FDIC.  On Sunday evening, recognizing the urgency of reducing uncertainty for Monday morning, Treasury, the Federal Reserve, and the FDIC announced a number of actions to stem uninsured depositor runs and to prevent significant disruptions to households and businesses.

First, the boards of the FDIC and the Federal Reserve unanimously recommended, and Secretary Yellen approved after consulting with the President, two actions that would enable the FDIC to complete its resolutions of the two banks in a manner that fully protects all of their depositors.  These actions ensured that businesses could continue to make payroll and that families could access their funds. Depositors were protected by the Deposit Insurance Fund.  Equity holders and bond holders were not covered.

Second, the Federal Reserve created the Bank Term Lending Program, a new facility to provide term funding to all insured depository institutions eligible for primary credit at the discount window, based on their holdings of Treasury and government agency securities. This program, along with its pre-existing discount window, has helped banks meet depositor demands and bolstered liquidity in the banking system.

This two-pronged, targeted approach was necessary to reassure depositors at all banks, and to protect the U.S. banking system and economy. These actions have helped to stabilize deposits throughout the country and provided depositors with confidence that their funds are safe. 

In addition to these actions, on March 16th, 11 banks deposited $30 billion into First Republic Bank. The actions of these large and mid-size banks represent a vote of confidence in the banking system and demonstrate the importance of banks of all sizes working to keep our economy strong.  Moreover, on March 20th the deposits and certain assets of Signature Bridge Bank were acquired from the FDIC, and on March 26th the deposits and certain assets of Silicon Valley Bridge Bank were acquired from the FDIC.

We continue to closely monitor developments across the banking and financial system, and coordinate with Federal and state regulators. As Secretary Yellen has said, we have used important tools to act quickly to prevent contagion. And they are tools we would use again if warranted to ensure that Americans’ deposits are safe.

Looking forward, while we do not yet have all the details about the failures of the two banks, we do know that the recent developments are very different from those of the Global Financial Crisis.  Back then, many financial institutions came under stress because they held low credit-quality assets. This was not at all the catalyst for recent events. Our financial system is significantly stronger than it was 15 years ago.  This is in large part due to post-crisis reforms for stronger capital and liquidity requirements.  

As you know, the Federal Reserve announced a review of the failure of SVB and the FDIC a review of Signature bank.  I fully support these reviews and look forward to learning more in order to inform any regulatory and supervisory responses. We must ensure that our bank regulatory policies and supervision are appropriate for the risks and challenges that banks face today.

The American financial system is strong in part because of our dynamic and diverse banking system.  Large, small, and mid-size banks all play an important role in our economy. Small and mid-size banks, including community banks, serve a vital role in providing credit and financial support to families and small businesses. Smaller banks provide 60% of loans to US small businesses.[1] Their specialized knowledge, expertise, and relationships in their communities enable them to capably serve customers, and their presence increases competition in the banking sector for the benefit of consumers.

I want to thank the Committee for its leadership on these important issues and for inviting me here to testify today.  I look forward to your questions. 





Remarks by Secretary Janet L. Yellen on Anti-Corruption as a Cornerstone of a Fair, Accountable, and Democratic Economy at the Summit for Democracy

WASHINGTON – Today, as part of the Biden-Harris Administration’s second Summit for Democracy, Secretary Janet L. Yellen brought together leaders from government, civil society, and international organizations to discuss efforts to counter corruption and illicit finance in order to uphold the rule of law, promote good governance, and ensure an equal economic playing field. In late 2021, the United States announced its first-ever whole-of government strategy to counter corruption, and has been implementing the strategy throughout 2022 and 2023.

As part of Treasury’s anti-corruption work, the Secretary today announced the launch of a commitment by the United States and more than twenty foreign governments and authorities participating in the Summit to enhance beneficial ownership transparency. This commitment is in line with the revised FATF standard, which requires countries to improve the transparency of legal persons, like shell companies, and to prevent their misuse.

Click here to read the Summit for Democracy Commitment on Beneficial Ownership and Misuse of Legal Persons.

Remarks As Prepared for Delivery

Thank you very much for joining me here today at this important event. This week, leaders from democratic countries are gathering all across the world to discuss the threats democracies face and how to overcome them. 

As you know, corruption is among the most corrosive of those threats. Corruption erodes democracy and the rule of law. It hinders the business environment. It precludes essential government services from getting to the people who need it. And it exacerbates transnational challenges like migration, organized crime, extremism, and instability—threatening our national security. 

At the first Summit for Democracy in 2021, I described corruption as a “common adversary” for democracies everywhere. Since then, we have all witnessed the dangers and damage that this adversary has inflicted across the globe. 

Corruption has fueled the rise of kleptocratic regimes that are divorced from the interests of their own citizens. It has consolidated the power of autocrats to repress and harm opponents at home and abroad. Corruption allowed Vladimir Putin and Russian oligarchs to squander their nation’s wealth to fund their illegal war against Ukrainian civilians. Last month, I saw firsthand in Kyiv the tragic impact of Russia’s barbaric attacks. Corruption has also fueled political dysfunction in countries like Lebanon. It has subjected nations to cycles of deteriorating economic conditions. 

Democracies, including our own, are not immune. We know that corruption’s effects spill across borders. We have seen corrupt foreign officials bury stolen funds in U.S.-based shell companies; kleptocrats launder kickbacks through anonymous purchases of foreign real estate; and elites move corrupt proceeds through complicit or unwitting financial gatekeepers like attorneys or wealth managers. 

Therefore, countering corruption falls on all of us. We must rely on democratically elected governments to uphold high standards of transparency. On justice systems to defend the rule of law. On civil society and the press to shine light on wrongdoing and injustices. On the private sector to identify and report suspicious transactions. And, of course, on Finance Ministries like our very own Treasury Department to shape the economic and financial rules of the road to help prevent these crimes.

I’d like to focus today on what we are doing both at home and with partners across the world to tackle corruption. 

Domestic Efforts 

Let’s start domestically. The United States has a unique obligation to tackle corruption. Corrupt actors from around the world continually attempt to exploit the vulnerabilities in the U.S. framework—for countering money laundering, terrorist financing, and others forms of illicit finance. Fighting corruption depends on our ability to patch these weaknesses and bring light to the financial shadows.  
Just like legitimate investors, corrupt actors move their money through the United States to take advantage of the world’s largest and most dynamic economy. They incorporate companies to benefit from our strong legal system, buy assets like real estate, and invest in our deep and liquid markets. We’ve long known this. But our efforts with allies over the last year to track sanctioned Russian assets and restrict the access of sanctioned Russians to the international financial system have underscored our vulnerability.
Over the last few years, the Treasury Department has been hard at work building key infrastructure to fortify our financial system—and those investments will soon begin to pay off.
By this time next year, it will be more difficult for corrupt and criminal actors to hide their identities and wealth behind anonymous shell companies in the United States. Starting January 1, 2024, many companies formed or operating in the United States will be required to report information about their beneficial owners—that is, the real people who own or control a company.  
Unmasking shell corporations is the single most significant thing we can do to make our financial system inhospitable to corrupt actors. I said at the first Summit for Democracy that “there’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States.” The beneficial ownership database will deter dirty money from entering the U.S. —and give law enforcement and other partners the tools they need to follow the money when it does.
Treasury has a lot of work to do to realize this promise – including by advancing additional rulemakings that need to be calibrated carefully. The database must be highly useful to all of its stakeholders. It must also ensure that firms—some of them very small businesses—understand their obligations. Reaching millions of small businesses is no small feat, and it is crucial to the success of the beneficial ownership system. Standing up this system will require the partnership and focus of all those who have been championing this initiative for decades – and many more.
In addition, Treasury is working to address additional vulnerabilities in our anti-money laundering infrastructure. We’re putting a particular focus on excluding corrupt actors from investing in, profiting from, and laundering money through investment firms as well as through purchases of U.S. real estate.
Corrupt actors have for decades anonymously stashed their ill-gotten gains in real estate. Those looking to exploit our system have been able to—with anonymity—store illicit proceeds in an appreciating asset. Buyers can pay in cash. By one estimate, illicit actors laundered at least $2.3 billion through U.S. real estate between 2015 and 2020. And the real number is almost certainly much higher. Treasury is working to remove that anonymity – and capture information about residential and commercial transactions not covered by our Bank Secrecy Act or beneficial ownership regimes. 
My team is looking at how to close off these avenues of money laundering without imposing an undue burden on legitimate transactions.

International Efforts

These domestic efforts go hand-in-hand with our work to fight corruption around the world. Beyond our bilateral efforts with individual countries, we are strengthening the global anti-corruption architecture. Without a strong and unified global approach, corrupt actors will continue to exploit financial loopholes and lightly regulated jurisdictions. 

We’re particularly focused on raising international standards for anti-money laundering at forums like the Financial Action Task Force, or FATF. 

In October, the FATF agreed to undertake three major projects to enhance global anti-corruption efforts. First, it will enhance assessments of countries’ implementation of the United Nations Convention Against Corruption. Second, it is addressing the use of “golden passports” by corrupt actors to hide their activities through the use of new identity documents. And third, it is working to reduce the ability of corrupt actors to take advantage of financial gatekeeping professions across all jurisdictions. Together, these initiatives place pressure on countries to strengthen anti-corruption regimes and mitigate vulnerabilities that corrupt actors too often exploit. 

We’re grateful for the FATF’s continued work to deepen international cooperation and support the rule of law. We commend its historic decision last month to suspend Russia’s membership. Russia has continued to disregard sovereignty, undertake inhumane attacks on Ukraine, and function as a haven for illicit finance. 

I am also pleased to launch today a commitment by the United States and more than twenty foreign governments and authorities participating in this summit to enhance beneficial ownership transparency. This commitment is in line with the revised FATF standard, which requires countries to improve the transparency of legal persons, like shell companies, and to prevent their misuse. And it reaffirms the broad support that the United States and its democratic partners share for enhancing financial transparency, fighting corruption, and upholding the rule of law. I look forward to more partners joining this important commitment following this summit.

The United States is building new international anti-corruption arrangements. Last year, President Biden and leaders from a dozen countries announced the launch of the Indo-Pacific Economic Framework for Prosperity. One of the key pillars of this Framework is building a “fair economy.” We are securing commitments to enact and enforce anti-money laundering and anti-bribery regimes in pursuit of that goal. 

Across all of these efforts, the private sector and civil society remain vital partners. I’m glad to see so many of you in the room today. I want to specifically highlight the Financial Transparency and Integrity Cohort, which was launched at the first Summit. This cohort has brought together a broad range of stakeholders to consult and coordinate on anti-corruption issues. 

Put simply, countering corruption is a collective effort that requires us to play by and enforce a common set of rules. We should use all of our tools, including the international financial institutions, to help those dedicated to rooting out financial crimes and to identify where countries are not yet taking appropriate steps. We can and must advance an architecture that safeguards our societies and our financial systems from abuse. 


Fighting corruption is not just the right thing to do. It is an essential piece of the puzzle as we work to build an economy that upholds a consistent set of rules for everyone—from government officials to business owners to working-class families. When those in power are able to pursue kickbacks, rig contracts, or enrich their friends, all of us suffer. Democracy suffers.

I’m confident that we can work to build a level playing field. This is our responsibility as democracies: to forge a world in which free institutions can thrive and in which those who play by the rules have the best chances of success. 

I’m grateful for everyone’s efforts here in pursuit of that goal. And I look forward to working with our many partners at this Summit to continue to turn that idea into a reality.

Thank you very much.