Congress weighs raising FDIC insurance cap

While these limits are not a problem for most individuals, businesses that do own a bank are Silicon Valley Bank would be in deep trouble if federal regulators did not take the unprecedented steps to protect all deposits.

It’s not clear that the same steps will be taken for depositors at smaller banks, as Treasury Secretary Janet Yellen noted last week that the bank it has to be big enough to have an impact on the wider financial system.

That prompted lawmakers to consider raising the FDIC’s insurance cap as a long-term solution.

Senator Elizabeth Warren (D-Mass.) told CBS News’ “Face the Nation” on Sunday that Congress needs to raise the threshold for businesses to can count on getting their money back if the bank goes bankrupt. He said that the new number could be in the millions.

“But know that we have to do this, because these banks are less regulated, and if we raise the cap, we are even more dependent on the regulators to do their job,” Warren said.

Rep. Patrick McHenry (RN.C.), chair of the House Financial Services Committee, said he would investigate whether the limit was too low, noting that Congress raised it from $100,000 to $250,000 after the 2008 financial crisis.

The coalition representing medium-sized banks, meanwhile, is reportedly pushing for the FDIC to insure all bank deposits for the next two years to “urgently stop the exodus of deposits from small banks.”

The conservative House Freedom Caucus on Monday is out against any attempt to raise insurance limits, stating that banks and their customers “should not be forced to incur costs to save large depositors.”

“Any universal guarantee on all bank deposits, whether implicit or explicit, perpetuates a dangerous precedent that only encourages future irresponsible behavior to be paid by disaffected those who follow the rules,” the caucus said in a statement.

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