Both Rep. Maxine Waters (D-CA) alongside Sen. Elizabeth Warren (D-MA) have joined together to sound the call for the Federal Deposit Insurance Corporation to “reexamine” the $250,000 deposit insurance threshold currently in place for bank accounts.
The massive majority of deposits at Silicon Valley Bank, which was known to offer up services to close to half of a large number of venture-backed technology and healthcare firms in the United States prior to the collapse of the company, blew past the FDIC insured threshold set at $250,000. A large number of regulators quickly scrambled to offer up guarantees to all deposits for Silicon Valley Bank such that the rest of the financial system, through which about half of deposits have pushed past $250,000, would remain safeguarded against bank runs.
As one of the senior members of the House Financial Services Committee, Waters stated as part of an interview released in a report from The New York Times that legislators should really think about increasing the threshold for insurance on deposits. “When you have something like Silicon Valley Bank with over 90% of its depositors uninsured,” she commented. “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 currently established $250,000 threshold is sufficient for most individuals, yet most businesses like the ones which were primarily served by Silicon Valley Bank often hold much larger sums to carry out operations and pay their staff. The FDIC now directs holdings that were maintained by Silicon Valley Bank, while the Treasury Department and Federal Reserve vowed that depositors both well above and under the limit of $250,000 will have their assets taken care of. Signature Bank did end up being closed down in the same way by regulators this past weekend.
Waters did state that any acquisition deal that took place involving Silicon Valley Bank should avoid consolidation with major financial institutions. “I’m not interested in mergers so much,” she tagged on. “I don’t want this country to become a country where we rely on just four or five big banks.”
Warren, known to be a member of both the Senate Banking Committee and the Senate Finance Committee, commented that legislators 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 explained via an interview with CNBC, explained 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.”