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Top House Republican Skeptical Of Calls To Raise FDIC Insurance Cap: ‘More Risk Taking In The Financial Sector’

  A top House Republican expressed skepticism about calls to increase the federal   bank   deposit insurance cap. House Financial Services C...

 A top House Republican expressed skepticism about calls to increase the federal bank deposit insurance cap.

House Financial Services Committee Chairman Patrick McHenry (R-NC) cast doubt on such proposals Sunday on CBS News’s “Face the Nation.” Democrats have floated raising the FDIC bank deposit insurance cap from $250,000 to between $2-10 million. But McHenry said that Congress needs to balance the costs and risks to the financial system before making such a consequential change.

“It’s the first time I’ve heard a proposal like that,” McHenry said. “And I have not had a single conversation with the White House or the administration about deposit insurance, changing the levels. What I will do though, legislatively, and in an oversight function is to determine whether or not we need to address the FDIC deposit level. We did it after the last financial crisis raising from $100,000 to $250,000. We had a temporary program, post-financial crisis to support deposits, to ensure that folks had confidence in their local bank.”

But McHenry stressed the need to balance the benefits and the risks.

“What I want to know is the trade-off though, the moral hazard of having more risk-taking in the financial sector, and also the impact it would have on community banks,” he said. “We have far fewer community banks now than we’ve had in generations. That’s a significant problem for competition in the financial services arena.

“It is not a pure play of allowing a larger set of insurance coverage,” he added, “It costs the financial system significantly, and especially community banks. We need to look very carefully at this.”

Top Democrats on the committees overseeing the financial sector called for the FDIC to increase the deposit insurance threshold on bank accounts in the wake of the Silicon Valley Bank collapse. The vast majority of depositors at the bank exceeded the $250,000 limit. Regulators scrambled to guarantee all deposits at SVB to avoid bank runs.

California Democratic Congresswoman Maxine Waters, who serves on the House Financial Services Committee, floated the idea in an interview with The New York Times Tuesday.


“When you have something like Silicon Valley Bank with over 90% of its depositors uninsured, 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?” she said.

Massachusetts Democratic Senator Elizabeth Warren, a member of the Senate Banking Committee and the Senate Finance Committee, said Congress 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, via 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.”

Warren on Sunday said raising the cap has “got to be on the table right now.”

“I think that lifting the FDIC insurance cap is a good move,” said Warren. “Now the question is, where’s the right number on lifting it?… This is a question we got to work through. Is-is it $2 million? Is it $5 million? Is it 10 million?”

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