The vast majority of deposits at Silicon Valley Bank, which offered services to nearly half of the venture-backed technology and healthcare firms in the United States before its collapse last week, exceeded the $250,000 threshold insured by the FDIC. Regulators scrambled to guarantee all deposits at Silicon Valley Bank such that the remainder of the financial system, in which roughly half of deposits surpass $250,000, would remain safeguarded against bank runs.
Waters, a senior member of the House Financial Services Committee, said in an interview with The New York Times that lawmakers should contemplate increasing the deposit insurance threshold. “When you have something like Silicon Valley Bank with over 90% of its depositors uninsured,” she remarked, “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?”
The current threshold of $250,000 is suitable for most individuals, yet businesses such as the ones served by Silicon Valley Bank often retain larger sums to conduct operations and pay employees. The FDIC now directs holdings maintained by Silicon Valley Bank, while the Treasury Department and Federal Reserve vowed that depositors both above and below the $250,000 limit will have their assets insured. Signature Bank was likewise closed by regulators on Sunday.
Waters said that any acquisition deal involving Silicon Valley Bank should avoid consolidation with major financial institutions. “I’m not interested in mergers so much,” she added. “I don’t want this country to become a country where we rely on just four or five big banks.”
Warren, a member of the Senate Banking Committee and the Senate Finance Committee, meanwhile remarked that lawmakers should “reexamine, just overall, about why we have limits” at the $250,000 threshold. “Some small business, some nonprofit, needs a place to manage its money,” she said in an interview with CNBC, according to a report from 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.”
The lawmaker has contended that portions of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was signed by former President Donald Trump to ease oversight for banks between $50 billion and $250 billion in assets, should be repealed. She submitted legislation alongside Rep. Katie Porter (D-CA) meant to implement “stronger oversight” which would “help protect our economy from heightened risk.”
“Last week the FDIC was forced to rush in to take over two failing banks, Silicon Valley Bank and Signature Bank, and then take extraordinary actions to protect those banks’ customers and prevent the contagion from spreading throughout the economy,” Warren said on the Senate floor. “If Congress and the Federal Reserve had not rolled back key provisions of Dodd-Frank, these banks would have been subject to stronger liquidity and capital requirements to help withstand financial shocks.”