4 distinguished U.S. lawmakers on banking matters said on Sunday they might consider whether a better federal insurance limit on bank deposits was needed to stem a financial crisis marked by a drain of enormous, uninsured deposits away from smaller and regional banks.
“I believe that lifting the FDIC insurance cap is an excellent move,” Senator Elizabeth Warren, a Democrat, said on CBS’s “Face The Nation” program, referring to the Federal Deposit Insurance Corporation’s current $250,000 limit per depositor.
Asked what the brand new, higher level must be, Warren, a member of the Senate Banking Committee, said: “It is a query we have set to work through. Is it $2 million, is it $5 million? Is it $10 million? Small businesses have to have the ability to count on getting their money to make payroll, to pay the utility bills.”
Warren declined to debate conversations she has held with the Biden administration about such a move, but said an insurance limit hike “is one in every of the choices that is got to be on the table without delay.”
Senator Mike Rounds, a Republican on the Senate Banking Committee, also questioned whether the $250,000 limit, which was increased from $100,000 in the course of the 2008 financial crisis, was still appropriate.
“Perhaps that is not enough,” Rounds told NBC’s “Meet the Press.”
He added that regional and smaller banks would want some “reassurances” that they will compete with larger banks and “it is going to take a few months for consumers outside to acknowledge that each one these banks are stable.”
Republican Representative Patrick McHenry, chairman of the House Financial Services Committee, said he would work to handle the adequacy of FDIC deposit insurance, but added that he has not had any conversations with Biden administration officials on raising the limit.
“What I’ll do though, legislatively, and in an oversight function, is to find out whether or not we’d like to handle the FDIC deposit level,” McHenry told the identical CBS program.
In the course of the financial crisis that erupted in 2008, the FDIC temporarily backstopped all deposits to safeguard smaller banks.
Pressure on midsized and smaller banks from deposit outflows continued on Friday despite a move by several large banks to deposit $30 billion into First Republic Bank, an establishment rocked by the failure of Silicon Valley Bank and Signature Bank.
Some former officials, including former FDIC chief Sheila Bair, have said regulators might have to repeat a short lived blanket guarantee on all U.S. deposits. Under the Dodd-Frank financial reform law, such a move requires Congress to pass a resolution of approval on an expedited schedule.
McHenry said he wanted to look at the trade-offs of upper deposit insurance limits, “the moral hazard of getting more risk-taking within the financial sector, and likewise the impact it could have on community banks.”
A U.S. Treasury spokesperson declined to comment. Treasury Secretary Janet Yellen told senators last week that further guarantees of uninsured bank deposits beyond those in SVB and Signature Bank would require systemic risk determinations by her, President Joe Biden and “supermajorities” 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 need to handle the $250,000 limit, but not every bank must be “bailed out.”
“There might be a matter going forward as to how we take care of deposits over $250,000 as being covered here. But what the mechanism could be if we do this in any respect, is something very much as much as debate,” Van Hollen said.