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Sen. Warren calls for lifting deposit insurance cap, Fed says


Sen. Elizabeth Warren (D-Mass.) on Sunday urged Congress to raise federal insurance levels for bank deposits above $250,000, a week after the Biden administration announced it would protect all Silicon Valley Bank depositors, regardless of how much money they had in the failing institution.

Currently, the Federal Deposit Insurance Corporation, or FDIC, only insures up to $250,000 in bank deposits. On CBS’s “Face the Nation,” Warren, a member of the Senate Banking Committee and a commercial and bankruptcy law expert, suggested increasing that number to anywhere from $2 million to $10 million.

“Small businesses need to be able to rely on getting their money to pay salaries, to pay the bills,” she said. “Nonprofit organizations must be able to do that. These are not people who can examine the safety and soundness of their individual banks. That is the job the regulators have to do.”

Warren, who was among a faction of Democrats opposing a 2018 law that rolled back key provisions of the 2010 Dodd-Frank law and weakened banking regulations, said lifting the FDIC insurance cap would be “a good move” if done in context. with tighter rules for banks.

Big banks could get bigger as ‘too-big-to-fail’ crisis pools worry

In another appearance, on ABC’s “This Week,” Warren got more specific, saying she wants Congress to repeal a provision in the 2018 law that had loosened restrictions on banks with $50 billion or more in assets.

“It’s the banks whose main regulator is the Federal Reserve Bank. And it’s the banks that took on these risky practices that have ultimately … blown up at least three banks,” Warren said. “We need strict regulations. If you have more than $50 billion … you should be subjected to stress tests and decent capital requirements and so on.”

A longtime critic of Federal Reserve Chairman Jerome H. Powell, Warren also said he should ensure the Fed halts its campaign to raise interest rates, citing factors such as the war in Ukraine and falling prices. The Fed’s next policy meeting is on Tuesday and Wednesday, with the interest rate announcement on Wednesday afternoon.

“Raising interest rates does nothing to solve these problems. All it does … is put millions of people out of work,” Warren said.

She stopped short of explicitly saying she had advised President Biden to remove Powell as Fed chairman, but said he should no longer be in that position.

“Look, my views on Jay Powell are well known at this point,” she added. – He has had two jobs. One is to deal with monetary policy. One is to deal with regulation. He has failed in both.”

Other lawmakers also weigh in. On “Face the Nation,” Rep. Patrick T. McHenry (RN.C.), chairman of the House Financial Services Committee, said that while Warren’s interview was the first time he had heard of a proposal to lift the deposit insurance cap, he did not rule out the possibility. McHenry noted that the FDIC had raised the deposit insurance cap from $100,000 to $250,000 in 2010, after the last financial crisis.

“I have not had a single conversation with the White House or the administration about [changing the level on] deposit insurance,” McHenry said. “What I want to do, though … is determine if we need to address the FDIC deposit level.”

On NBC’s “Meet the Press,” Sen. Mike Rounds (RS.D.), a member of the Senate Banking Committee, suggested the $250,000 deposit cap was not high enough, citing inflation.

“When we talk about letting a bank fail, it’s one thing to say it’s okay to let the owners of a bank lose their resources. It’s another thing to say that depositors should necessarily be allowed to forfeit their deposits, Rounds said. “That’s why we start with a quarter of a million dollars in protection. Maybe that’s not enough.”

Warren’s proposal comes a week after federal authorities announced they would protect all deposits at two failing banks — Silicon Valley Bank and Signature Bank of New York — to stabilize and strengthen public confidence in the U.S. banking system. But the banks’ collapse has also renewed battles over federal banking regulations.

On Friday, Biden called on Congress to impose tougher penalties on senior bank executives whose mismanagement contributes to the failure of their institutions, saying current law limits his administration’s authority to hold bank executives accountable when their institutions fail and are placed into receivership under the FDIC, which Silicon Valley Bank did about a week ago.

Biden asked Congress to expand the FDIC’s authority to impose tougher penalties on executives at such banks, including barring them from taking other jobs in the banking industry, issuing fines and clawing back their compensation.

That compensation should include gains from stock sales, the White House specified later Friday, noting that Silicon Valley Bank CEO Greg Becker sold $3.6 million in company stock days before the bank’s collapse.

Under existing law, the FDIC can only fine bank executives who “recklessly” engage in a pattern of “unsafe or unsound” practices. The federal agency can also bar executives from holding jobs at other banks only if they show “willful or persistent disregard for the safety and soundness” of their bank.

“Congress should strengthen this tool by lowering the legal standard for imposing this prohibition when a bank is placed into FDIC receivership,” the White House said Friday. “The president believes that if you’re responsible for one bank’s failure, you shouldn’t be able to just turn around and run another.”

Azi Paybarah contributed to this report.

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