While the limit is not a problem for most individuals, businesses that have worked with banking have no problem Silicon Valley Bank would have been in deep trouble had federal regulators not taken the unprecedented step to protect all deposits.
It is not clear that the same step will be taken for depositors in smaller banks, as Treasury Secretary Janet Yellen noted last week that the bank in question must be large enough to have an effect to the broader financial system.
This is prompting lawmakers to consider raising the FDIC insurance ceiling as a long-term solution.
Sen. Elizabeth Warren (D-Mass.) told CBS News’ Face the Nation on Sunday that Congress needs to raise the limit on corporations can rest assured that they will get their money back when a bank goes under. She said the new number could be in the millions.
“But realize that we have to do this because these banks are under-regulated, and if we remove the cap, we’re going to rely even more on regulators to do their job,” Warren said.
Rep. Patrick McHenry (RN.C.), chairman of the House Financial Services Committee, said he would consider whether the cap was too low, noting that Congress had raised it $100,000 to $250,000 after the 2008 financial crisis.
A coalition representing mid-sized banks, meanwhile, is reportedly urging the FDIC to insure all bank deposits for the next two years to “immediately halt the deposit exodus from smaller banks.”
The Conservative House Freedom Caucus came out Monday against every effort raising the insurance limit and saying that banks and their customers “must not be forced to bear the cost of bailouts of large depositors”.
“Any universal guarantee on all bank deposits, whether implicit or explicit, sets a dangerous precedent that simply encourages future irresponsible behavior paid for by the bystanders who have followed the rules,” the caucus said in a statement.
Comments are closed.