Elizabeth Warren calls for lifting FDIC insurance cap, possibly in millions, after SVB failure exposes regional banks at risk
Senator Elizabeth Warren said she favors lifting the Federal Deposit Insurance Corp.’s standard cap of $250,000, possibly in the millions, after the Silicon Valley Bank bankruptcy exposed the risk American regional banks.
“I think lifting the FDIC insurance cap is a good move,” Warren, a Massachusetts Democrat on the Senate Banking Committee, said in an interview with CBS News on Sunday. “Now the question is where is the right number to lift it.”
“It’s an issue we need to work on. Is it 2 million, is it 5 million, is it 10 million? she said on “Face the Nation”.
Other lawmakers expressed caution, reflecting in part the challenge of passing legislation in a divided Congress.
“Well, this is the first time I’ve heard of such a proposal,” House Financial Services Committee Chairman Patrick McHenry, a Republican from North Carolina, told CBS. “And I haven’t had a single conversation with the White House or the administration about deposit insurance, changing the levels.”
Warren, a longtime champion of tougher regulation, amplified her criticism of Federal Reserve Chairman Jerome Powell on Sunday shows, telling CBS, NBC’s “Meet the Press” and ABC’s “This Week” that he “had taken a flamethrower” for banking regulation.
Banks with at least $50 billion in assets should not have qualified for the regulatory relief offered to smaller community banks, Warren told “This Week.”
She declined to say whether President Joe Biden’s administration was actively seeking support to raise the FDIC’s cap on deposit insurance. “I don’t want to talk about private conversations, but I will say that has to be one of the options that’s on the table right now,” Warren told CBS.
Sen. Mike Rounds, a Republican on the Banking Committee, suggested lawmakers may need to reconsider the $250,000 deposit insurance level. “Maybe that’s not enough,” he said on NBC on Sunday. “Should we increase that?”
Sen. Chris Van Hollen, a Democrat from Maryland, echoed the Biden administration’s position that bank investors will not be bailed out without explicitly supporting a change in the FDIC umbrella.
“We’re not going to bail out any banks,” he said on “Fox News Sunday.” “There will be a question in the future about how we treat deposits over $250,000 as covered here. But what the mechanism would be if we did that is still up for debate.
Warren has been at the forefront of critics blaming the Fed, regulators and former President Donald Trump for laying the groundwork for a crisis that destroyed Silicon Valley Bank and New York’s Signature Bank and drove a group big business to pledge $30 billion to help stabilize First Republic Bank.
When asked on CBS if she trusted San Francisco Fed President Mary Daly after SVB fell into federal receivership, Warren replied, “No, I don’t,” while claiming that Powell and the Fed were “ultimately responsible”.
“We need accountability for our regulators, who have clearly fallen on the job, and that starts with Jerome Powell,” Warren said.
She also called for accountability of bank executives, including clawbacks of former SVB CEO Gary Becker and lifetime bans from the financial industry for executives who were in charge of banks that failed.
–With help from Anna Edgerton and Ian Fisher.