Warren says proposal to lift FDIC insurance cap ‘needs to be on the table right now’

Washington— Massachusetts Sen. Elizabeth Warren said Sunday that a congressional proposal to lift the Federal Deposit Insurance Corporation (FDIC) insurance limit of its current $250,000 limit is an option that “needs to be on the table right now” as lawmakers debate how to respond to the rapid collapse of two banks earlier this month.

“I think lifting the FDIC insurance cap is a good move,” Warren said in an interview with “Face the Nation.” “Now the question is, where is the right number for the lift? But recognize that we have to do it, because these banks are under-regulated, and if we lift the cap, we demand – or rely even more on the regulators to do their jobs.”

The Democratic senator said the key question Congress needs to address is where to set the insurance cap for FDIC deposits.

“Is it $2 million? Is it $5 million? Is it 10 million? she says. “Small businesses need to be able to rely on getting their money to do payroll, to pay utility bills. Nonprofits need to be able to do that. They’re not people who can investigate the safety and soundness of their individual banks. That’s the job regulators are supposed to do.”

Senator Elizabeth Warren on “Face the Nation”, March 19, 2023.

Warren declined to say whether she was speaking with the White House about a plan to raise FDIC insurance levels above its $250,000 cap, but said “it’s one of the options that must be on the table right now”.

The abrupt closing of Silicon Valley Bank March 10, followed by Signature Bank of New York collapse days later sent federal banking regulators scrambling to craft a plan to shore up the banking system and reassure Americans of their confidence in the financial system.

As a member of Biden administration emergency measures was to ensure that all depositors with accounts at Silicon Valley Bank would have access to all their money. The Federal Reserve also introduced a new lending facility to help financial institutions meet the needs of depositors.

But the collapse of the two banks has renewed scrutiny from top banking regulators, including Federal Reserve Chairman Jerome Powell.

Warren said Sunday that the regulators and executives of those banks should be held accountable, and criticized the Fed and Powell in particular, who she said is a “dangerous man to have in this position.”

“We need accountability for our regulators who have clearly failed in their job, and that starts with Jerome Powell, and we need accountability for the leaders of these big financial institutions,” Warren said. “Look, there should be clawbacks for Gary Becker and the others who are blowing up these banks.”

The Massachusetts senator also said she didn’t trust San Francisco Fed President Mary Daly because public revelations as early as December indicated there were problems with Silicon Valley Bank.

“The Fed should have acted, but the San Francisco Fed and the Federal Reserve Bank,” she said. “Remember that the Federal Reserve Bank and Jerome Powell are ultimately responsible for monitoring and supervising these banks. And they have made it clear that they believe their job is to ease regulation on these banks. We we have now seen the consequences.”

Warren said Powell “needs to turn around and subject these banks to greater scrutiny,” and that Congress has tightened banking regulations.

“This whole slice of banks has been under-regulated for five years now. And people are very concerned when you lift the hood, what’s under the hood, because the regulators clearly haven’t been on top of their game. work,” she said. “That’s why I’m asking the Fed for changes in its regulatory approach right now, and for changes in Congress so that we rescind the authorization to ease those regulations.”

Warren on Sundays separately call for an independent investigation into banking and regulatory failures, and called on the inspectors general of the Treasury, FDIC, and Federal Reserve to provide a preliminary report to Congress within 30 days.

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