The treasury secretary says the plan would be set in motion if additional collapses trigger a run on banks.
Treasury Secretary Janet Yellen worked to reassure bankers that the government is commitment to helping stabilize turmoil in the banking system when she spoke before America's top banking lobby Tuesday morning.
Her comments were aimed at reassuring depositors and Wall Street investors as the government and the nation's top bankers rush to contain the worst banking crisis in 15 years. "The situation is stabilizing," Yellen said."And the U.S. banking system remains sound. The Fed facility and discount window lending are working as intended to provide liquidity to the banking system. Aggregate deposit outflows from regional banks have stabilized."
The collapse of Silicon Valley Bank and Signature Bank sent a shockwave across the global financial system earlier this month. The government stepped in to guarantee the funds of all depositors soon afterward. SVB was shut down by California regulators after depositors rushed to withdraw funds amid concerns about the bank's balance sheet.
The 40-year-old bank ranked as the 16th-largest in the U.S. before its failure and is the largest financial institution to collapse since Washington Mutual at the height of the financial crisis in 2008. Signature Bank's failure marks the third-largest bank collapse in U.S. history, according to The Associated Press.
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