Treasury Secretary Janet Yellen on Thursday defended the Biden administration’s decision to protect uninsured money at two failed regional banks, insisting the actions boosted public confidence in the U.S. financial system.

Yellen, who testified before the Senate Finance Committee, was the first administration official to address lawmakers since California-based Silicon Valley Bank and New York-based Signature Bank failed in recent days. Regulators this week ensured depositors that all their money was protected, even above the usual $250,000 Federal Deposit Insurance Corp. cap.

“I can reassure the members of the committee that our banking system is sound and that Americans can feel confident that their deposits will be there when they need them,” Yellen said in her opening remarks.

In a hearing whose main purpose was to discuss President Joe Biden's budget proposal, the treasury secretary stressed that the action was not a taxpayer-funded bailout but rather paid for through federal deposit insurance funded by fees on banks.

Yellen said one of the reasons the federal government intervened was “because of the recognition there can be contagion in situations like this and other banks can then fall prey to the same kinds of runs, which we certainly want to avoid.”

In less than a week, Silicon Valley Bank failed after depositors rushed to withdraw money amid anxiety over the bank’s health. Then, regulators convened over the weekend and announced that Signature Bank also failed. 

The Justice Department and the Securities and Exchange Commission have since launched investigations into the Silicon Valley Bank collapse.

While some committee members applauded the federal government for stepping in to protect deposits, other lawmakers sought to assign blame to a number of different officials or agencies for the banks’ failures. 

Idaho Sen. Mike Crapo, the panel’s top Republican, said he attributed Silicon Valley Bank’s problems to high inflation that has prompted the Federal Reserve to hike up interest rates, causing SVB’s investments to lose value.

Others, meanwhile, blasted regulators for missing warning signs.

“Were they asleep at the wheel?” asked Sen. John Cornyn, R-Texas. “Many have suggested that banking regulators need to focus more on regulating banks, protecting depositors and taxpayers instead of straying off course and examining so-called climate-related risks and other social-engineering goals.”

Sen. Mark Warner, D-Va., was also among those who criticized regulators.

“Traditional prudential regulation should have caught this,” he said. “Where was the bank management? Where were the regulators, both state and federal in the case of SVB, that didn't get this interest rate mismatch caught much, much earlier?”

But Warner also blamed tech venture capitalists for what he called “the very first social media, internet-based bank run.”

“I think there were some bad actors in the VC community, who literally started to spur this run by virtually crying ‘fire’ in a crowded theater, in terms of rushing all these deposits out,” he said.

“I’m not sure what regulatory system anywhere — no matter how much capital, how many stress tests — that would have protected any institution from a $42 billion bank run in a single day,” Warner added.

Sen. Elizabeth Warren, D-Mass., blamed the rollback of regulations in 2018.

“These bank failures were the direct result of policymakers’ decisions over the last five years, beginning with a 2018 law signed by President [Donald] Trump with the support of both parties to weaken the regulations that had been put in place after the 2008 financial crisis to ensure that big banks never again crashed our economy,” she said.

Warren said she, too, has questions about the regulators’ role in the bank failures, but added, “Congress handed chair [Fed Chairman Jerome] Powell the flamethrower that he aimed at the banking rules.”

Sen. Thom Tillis, R-N.C., disagreed.

“It seems to me that here we're using 2155 as a red herring for something that I believe fundamentally is going to be a supervisory or regulatory lapse,” he said, referring to the Senate bill that relaxed regulations on banks.

Sen. James Lankford disputed the Biden administration’s assertion that taxpayers are not footing the bill to protect SVB and Signature customers, arguing other banks will inevitably subsidize the cost, which will be passed down to their account holders. 

“Every Oklahoman will pay higher fees,” he said.

Yellen responded: “If we have a collapse of the banking system and its economic consequences, that will have very severe effects on banks in Oklahoma” and elsewhere.

The Associated Press contributed to this report.