A prime Home Republican expressed skepticism about calls to extend the federal financial institution deposit insurance coverage cap.
Home Monetary Companies Committee Chairman Patrick McHenry (R-NC) solid doubt on such proposals Sunday on CBS Information’s “Face the Nation.” Democrats have floated elevating the FDIC financial institution deposit insurance coverage cap from $250,000 to between $2-10 million. However McHenry stated that Congress must steadiness the prices and dangers to the monetary system earlier than making such a consequential change.
“It’s the first time I’ve heard a proposal like that,” McHenry stated. “And I have not had a single conversation with the White House or the administration about deposit insurance, changing the levels. What I will do though, legislatively, and in an oversight function is to determine whether or not we need to address the FDIC deposit level. We did it after the last financial crisis raising from $100,000 to $250,000. We had a temporary program, post-financial crisis to support deposits, to ensure that folks had confidence in their local bank.”
However McHenry burdened the necessity to steadiness the advantages and the dangers.
“What I want to know is the trade-off though, the moral hazard of having more risk-taking in the financial sector, and also the impact it would have on community banks,” he stated. “We have far fewer community banks now than we’ve had in generations. That’s a significant problem for competition in the financial services arena.
“It is not a pure play of allowing a larger set of insurance coverage,” he added, “It costs the financial system significantly, and especially community banks. We need to look very carefully at this.”
High democrats on the committees overseeing the monetary sector referred to as for the FDIC to extend the deposit insurance coverage threshold on financial institution accounts within the wake of the Silicon Valley Financial institution collapse. The overwhelming majority of depositors on the financial institution exceeded the $250,000 restrict. Regulators scrambled to ensure all deposits at SVB to keep away from financial institution runs.
California Democratic Congresswoman Maxine Waters, who serves on the Home Monetary Companies Committee, floated the concept in an interview with The New York Occasions Tuesday.
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“When you have something like Silicon Valley Bank with over 90% of its depositors uninsured, do we increase the amount of premiums that banks will pay in order to have a bigger insurance fund or do we just remain the way that we are and take it on a one-by-one basis for consideration?” she stated.
Massachusetts Democratic Senator Elizabeth Warren, a member of the Senate Banking Committee and the Senate Finance Committee, stated Congress ought to “reexamine, just overall, about why we have limits” on the $250,000 threshold.
“Some small business, some nonprofit, needs a place to manage its money,” she stated in an interview with CNBC, by way of The Hill. “They need to be able to make payroll, they need to be able to pay the utility bills, and they need a safe place to have that money where somebody’s going to keep it safe.”
Warren on Sunday stated elevating the cap has “got to be on the table right now.”
“I think that lifting the FDIC insurance cap is a good move,” stated Warren. “Now the question is, where’s the right number on lifting it?… This is a question we got to work through. Is-is it $2 million? Is it $5 million? Is it 10 million?”
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