Biden’s economic chief says US banking system is safe and stable

Lael Brainard, director of the U.S. National Economic Council, dismissed concerns about the recent volatile banking markets following the collapse of two major U.S. banks.

“I think the banking system is very sound,” Brainard said at Semafor’s World Economy Summit on Wednesday. “It’s stable. The banking system is sound, but it was also important to the president, that the executives of those failed banks be held accountable and very important that taxpayer money not be at risk.”

Brainard said that after taking “very targeted actions” against the collapsed banks, the government is studying other options to insure that depositors at all levels have their assets protected should another bank collapse in the future.

“I think we do have the same playbook that works very well, but it is relevant for banks that fail,” she said, adding that the Federal Deposit Insurance Corporation (FDIC) is studying if deposit insurance should be changed.

A law passed under the Trump administration that weakened regulations like liquidity management and capital buffers for banks with under $250 billion in assets likely contributed to the recent banking troubles, Brainard said.

She added that while she could not predict whether there will be more collapses, indicators like deposit outputs stabilizing in the last few weeks are good news for the industry.

While economists have said that the banking crisis have made conditions more likely for the U.S. economy to enter into a recession, Brainard said that the national economy is showing “continued resilience” such as lower inflation and unemployment, but she did not explicitly rule out a future recession.