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Treasury Secretary Janet Yellen said on Monday that the banking system is stabilizing following the economic downturn caused by the coronavirus pandemic, but cautioned that the situation is different from what it was in 2008.
Yellen, speaking at a virtual event hosted by the National Council for Behavioral Health, said the government's quick action to bolster the financial system had helped stabilize the situation.
“We've seen a stabilization of the banking system, which is very different from what we saw in 2008,” said Yellen, who served as chair of the Federal Reserve from 2014 to 2018.
Yellen noted that the Federal Reserve had taken extraordinary measures to help support the banking system, including providing liquidity to banks and setting up lending programs.
“We have seen the banking system is stable and we're able to serve the needs of people and businesses,” Yellen said.
The Treasury Secretary also expressed optimism that the economic recovery would continue in 2021 as more people get vaccinated and businesses reopen.
“We expect economic activity to pick up as the virus is contained, and with the recovery in the second half of 2021,” Yellen said.
She also said that the Biden administration was focused on helping small businesses, which have been hit hard by the pandemic.
“We are looking very hard at how we can help small businesses, particularly those that are in areas that will have a harder time coming back,” Yellen said.
Yellen's comments come as the banking sector is showing signs of recovery following a tumultuous year. The Federal Deposit Insurance Corporation recently reported that the number of banks at risk of failure had fallen to near-historic lows.
Overall, Yellen's comments suggest that the banking system is in a much better position than it was in 2008, when the financial crisis plunged the U.S. economy into a deep recession. With the government taking quick action to support banks, the situation is beginning to look more stable, and Yellen is optimistic that the economic recovery will continue in 2021.