Four prominent US lawmakers on banking issues said Sunday they will consider whether higher federal insurance limits on bank deposits are needed to prevent a financial crisis marked by large uninsured deposits from small and regional banks.
“I think lifting the FDIC insurance cap is a good step,” Senator Elizabeth Warren, Democrat, said on CBS’ “Face The Nation” program, referring to the Federal Deposit Insurance Corporation’s current limit of $250,000 per depositor.
Asked if the new rate was higher, Warren, a member of the Senate Banking Committee, said: “That’s a question we have to ask ourselves. Is it $2 million, is it $5 million? Is it $10 million? Small businesses need to be able to rely on money to make payroll. , to pay utility bills.
Warren declined to discuss conversations she has had with the Biden administration about the measure, but said raising insurance limits “is one of the options that should be on the table right now.”
Senator Mike Rounds, a Republican on the Senate Banking Committee, also questioned whether the $250,000 limit, which was increased from $100,000 during the 2008 financial crisis, was still appropriate.
“Maybe not enough,” Rounds told NBC’s “Meet the Press.”
He added that regional and small banks want some “assurance” that they can compete with larger banks and that “it will take months for consumers outside to realize that all these banks are stable.”
Republican Representative Patrick McHenry, chairman of the House Financial Services Committee, said he would work to address the adequacy of the FDIC’s deposit insurance, but added that he had not yet spoken to Biden administration officials about raising the limit.
“What I’m going to do, legislatively, and in my oversight function, is to determine whether we need to address the FDIC deposit rate,” McHenry said on the same CBS program.
During the financial crisis that erupted in 2008, the FDIC temporarily canceled all deposits to protect small banks.
The pressure on midsized and small banks of deposit outflows continues despite the move by several large banks to deposit $ 30 billion to First Republic Bank, an institution rocked by the failure of Silicon Valley Bank and Signature Bank.
Some former officials, including former FDIC chief Sheila Bair, have said the regulator may need to reimpose temporary blanket guarantees on all U.S. deposits. Under the Dodd-Frank financial reform law, the move would require Congress to pass an approval resolution on an expedited schedule.
McHenry said he wanted to examine the trade-off of deposit insurance limits that are higher, “the moral hazard of having more risk-taking in the financial sector, and also the impact on community banks.”
A spokesman for the US Treasury declined to comment. Treasury Secretary Janet Yellen told senators last week that further guaranteeing uninsured bank deposits beyond those at SVB and Signature Bank would require systemic risk determinations by her, President Joe Biden and a “supermajority” of the Federal Reserve and FDIC boards.
Senator Chris Van Hollen, a Democrat on the Senate Finance Committee, also told Fox News Sunday that Congress and regulators should address the $250,000 limit, but not every bank should be “exempted.”
“There is a question going forward about how we deal with deposits over $ 250,000 as guaranteed here. But what mechanism will be if we do it at all, something very up for debate,” Van Hollen.