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The Federal Reserve Chairman surprised practically no one by hiking interest rates on Wednesday, but the Treasury Secretary scared almost everyone.

Despite the fun and games of the past couple weeks, Fed Chair Jerome Powell voiced confidence in the state of banks while announcing his anticipated 25 basis point hike. But while Powell was preaching calm and ample liquidity, Treasury Secretary Janet Yellen sent investors into a tizzy by telling Congress that she was not yet considering any kind of unilateral expansion of FDIC deposit insurance for regional banks.

Up, Up, and Away

The rate hike everyone saw coming was absorbed pretty well by a market that was still praying it wouldn't come after the recent banking unpleasantness. But Powell was clear that poor risk management and digital bank runs were not enough of a reason to doubt the system and let inflation run wild. And while Wall Street may be baking in rate cuts later this year, Powell was explicit that he and his fellow Fed officials "don't see" that happening.

The real mic drop belonged to Yellen, who sent traders running toward the Sell button with their hair on fire. In response to a question from the Senate Finance Committee, Yellen stated that the Treasury has "not considered or discussed having anything to do with a blanket insurance or guarantees of all deposits." While Powell had earlier also stated that the Fed had no plans to backstop all bank deposits, it was Yellen who seemed to have the ear of Mr. Market.

  • After rising slightly in the wake of the rate hike, the Dow Jones Industrial Average fell 470 points after Yellen's answer in the Senate.
  • Powell and Co.'s ninth consecutive hike brought the funds rate to the 4.75% – 5% range, its highest level since September 2007, a date that should come with its own ominous music.

Anyone who still thought the Fed would hold or cut can refer to what Powell said at the tippy top of his Wednesday press conference, reminding Americans that "Inflation remains too high and the labor market continues to be very tight."

Is it safe?: First Republic Bank is the most hotly watched victim of SVB's aftershock. Nervous wealthy investors began pulling their money and running after SVB's collapse. Since the start of the month, First Republic's stock value has plunged 90%, and Barron's reported the bank is exploring a sale or at least trimming assets. If only First Republic had the confidence of Jerome Powell.

Thornton McEnery and Griffin Kelly