Not Jerome Powell, but Janet Yellen shook the US market overnight

However, the selloff was sparked by US Treasury Secretary Janet Yellen, who said regulators were not looking to provide “blanket” deposit insurance to stabilize the US banking system, without working with lawmakers. Yellen also said executives of U.S. banks that recently failed should also be held accountable.

Yellen’s comments came after Fed Chairman Jerome Powell said all deposits and savings in the United States were safe.

“I haven’t considered or discussed anything to do with global insurance or deposit guarantees,” Yellen said Wednesday during a hearing before a Senate subcommittee, responding to a question about whether protections for all US filings would require congressional approval. She did not specify whether this referred to a temporary or permanent change to the cap.

The market sold off strongly after Yellen’s comments to end at the low of the day. The S&P 500 closed again below 4,000 to end down 1.6%. The Dow Jones lost more than 500 points, while the Nasdaq also fell 1.6%.

Yellen said earlier that the United States was ready to take further action to protect depositors if small lenders were threatened. Its staff is exploring ways to temporarily raise the federal insurance cap above $250,000 without congressional approval should the crisis worsen, Bloomberg News reported Monday.

Shares of regional banks slumped, dragging the market down, after Yellen’s comments and as Powell said he’s ready to keep raising rates until inflation shows signs of slowing down.

However, Yellen hinted that he had given more thought to the temporary FDIC cap increase. She assured Sen. Joe Manchin that if the insurance was extended, it could be considered a “one-time special assessment” where the cost was not a burden on customers with smaller deposits.

(With agency contributions.)