If something goes terribly wrong, and lawmakers on Capitol Hill are slow to react, could Janet Yellen and Jerome Powell guarantee all US bank deposits?

That’s a burning question in the wake of multiple US bank failures. Congress isn’t just divided along party lines, it’s divided within the two parties as well. There’s the usual internecine inter-party conflict, and also bitter intra-party rivalries, particularly on the Republican side, where Kevin McCarthy in January sold out the speakership to a motley crew of GOP firebrands demanding all manner of concessions, some clear others less so.

I argued Tuesday that a universal deposit guarantee of some kind is a foregone conclusion after SVB, which I described as a precedent-setting moment. Having crossed the Rubicon, it’ll be difficult for Treasury to go back.

In the near-term, it seems likely that Yellen would be able to describe pretty much any bank failure as potentially systemic if she wanted to. Bank runs are about confidence, and when confidence is shaken, any incremental signs of stress pose a contagion risk. For what it’s worth, Goldman thinks that taken together, recent events, interventions and rhetoric, are tantamount to a backstop.

“The implicit guarantee of all deposits is nearly — but still not quite — explicit,” the bank’s Alec Phillips said Wednesday, citing the same Tuesday remarks from Yellen I mentioned in the linked article above. “While it already seemed likely that uninsured depositors would be made whole if any bank failed in the near term — failing to do so would risk a new run on deposits — Yellen’s comment now links small banks to systemic risk more directly.”

On Wednesday, Yellen spoke to the Senate. Her remarks were interpreted as a repudiation of recent reporting, a walk back of Tuesday’s remarks or both. Backstopping all bank deposits with FDIC insurance “isn’t something that we have looked at,” she told lawmakers. “I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits,” she went on.

I frankly don’t believe that. I think Yellen has absolutely discussed something of that nature, and I think it probably entails precisely what Bloomberg’s Monday reporting suggested it entails — namely, leveraging (figuratively and literally) the ESF.

If the question is whether Treasury, working with the Fed, could institute a stopgap guarantee in lieu of congressional action (which, don’t delude yourself, they’d have to in the highly unlikely event of a worst-case scenario), the answer is “Yes.” Or, at least “Probably.”

In the same note mentioned above, as well as in a note published last week, Goldman ran through the mechanics. Admittedly, I’m not convinced the workaround would cover the absolute worst-case scenario, but considering absolute worst-case scenarios typically entail positing “least of your worries”-type outcomes, I don’t think it’s especially helpful to insist on a cent-for-cent accounting.

As Goldman pointed out last week, Yellen’s authority under the ESF “is quite broad,” so it’s really just a matter of resources, and on that point, the bank said that in all likelihood, most of the ESF’s gross assets would (or at least could) be considered “available to be pledged to a Fed program if necessary.” That means — I suppose, although I could be wrong — that Treasury could throw at least $200 billion, give or take, at the problem or provide it as credit protection for what would potentially be a mammoth Fed facility.

Goldman likened this to the money market fund guarantee in 2008, and ultimately said a backstop is both logistically and legally feasible, at least in theory. And yet, the bank doubts it’ll come to that absent a total meltdown. “While we do not doubt that the Treasury could guarantee all deposits, this seems unlikely unless bank stress substantially intensifies,” Phillips said, adding that,

It seems reasonably clear that the Treasury could construct a program to cover uninsured deposits if necessary [but] this would be a major step that the Treasury would likely only take if the situation worsens considerably. Using taxpayer funds to backstop large deposits belonging to corporations and wealthy individuals is likely to come with political costs. And while it seems fairly clear that the Treasury could use the ESF for this purpose, it nevertheless appears to run counter to the intent of Congress, which specifically limited the FDIC’s authority to explicitly back these deposits (the FDIC has protected them in any case). While it is clearly possible that the Treasury could backstop deposits if bank stress substantially intensifies, we think there is a high hurdle to doing so.

During the same Senate subcommittee discussion Wednesday, Susan Collins asked Yellen if she (Yellen) supported Elizabeth Warren’s calls for a higher FDIC cap. Yellen said her focus currently is on ensuring the public is confident in the system.

“We can debate in the days ahead whether we think $250,000 is the right level. I’m not going to weigh in on it,” she told Collins. “I think there’s plenty of time to have reasoned discussions. For now, I want to use the tools that we do have at our disposal to improve confidence and make sure that banks that are faced with deposit outflows have adequate access to liquidity.”