Yellen not sayin’ again

When Treasury Secretary Janet Yellen toed the administration line on inflation being “transitory,” she exposed herself as a political hack. Why anyone should even believe anything she says is not exactly a riddle wrapped in a mystery inside an enigma. No one should.

The Wall Street Journal leads off its editorial today with reference to Yellen:

Janet Yellen offered more assurances Thursday that U.S. banks are safe and sound—and we doubt even the Treasury Secretary believes it. Certainly no one else does. The biggest American banks had to commit $30 billion on Thursday to rescue First Republic Bank—15 years to the day since Bear Stearns’s collapse. Happy anniversary!

The San Francisco-based bank’s shares have lost 70% since last Wednesday, and its credit rating has been downgraded to junk. First Republic investors and depositors haven’t been soothed by the Federal Deposit Insurance Corp.’s guarantee of uninsured deposits at Silicon Valley (SVB) and Signature banks, or the Federal Reserve’s new emergency lending facility.

More troubling, a $70 billion liquidity lifeline offered by J.P. Morgan and others over the weekend appears to have been insufficient. If First Republic’s problems go deeper than liquidity, the risks in the U.S. banking system may be bigger than regulators recognized and could grow if the economy slows.

First Republic caters to the affluent in California’s Bay Area, Los Angeles, Boston and New York. About two-thirds of its deposits are uninsured and thus susceptible to a run if customers lose confidence. Wealthy customers were pulling deposits even before SVB failed.

The editors have other well-founded concerns, but they also underline the risks created by the inflation Yellen facilitated. Watching Yellen talk around the questions posed by Senator James Lankford yesterday is worth another column at least. If words could wriggle and writhe, that’s what they would be doing here.

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