Senator Warren calls for deposit insurance cap to be lifted, blasts Fed
“Small businesses need to be able to rely on their money to make payroll, to pay utility bills,” she said. “Nonprofit organizations need to be able to do that. These are not people who can investigate the safety and soundness of their individual banks. This is the job that regulators are supposed to do.
Warren, who was part of a faction of Democrats that strongly opposed a 2018 law that rolled back key provisions of the 2010 Dodd-Frank Act and weakened banking regulations, said lifting the insurance cap from the FDIC would be “a good decision” if made jointly. with stricter banking regulations.
In another appearance, on ABC’s “This Week,” Warren got more specific, saying she wanted Congress to repeal a provision of the 2018 law that eased restrictions on banks with $50 billion or more assets.
“These are the banks for which the primary regulator is the Federal Reserve Bank. And it was the banks that engaged in these risky practices that ultimately… blew up at least three banks,” Warren said. “We need strict regulations. If you have over $50 billion… you should be subject to stress tests and decent capital requirements etc.
A longtime critic of Federal Reserve Chairman Jerome H. Powell, Warren also said he should ensure the Fed halts its interest rate hike campaign, citing factors such as the war in Ukraine and abusive prices. The Fed’s next policy meeting is on Tuesday and Wednesday, with the rate announcement scheduled for Wednesday afternoon.
“Raising interest rates does nothing to solve these problems. All it does…is put millions of people out of work,” Warren said.
She stopped short of explicitly saying that she had advised President Biden to remove Powell from the Fed chair, but said he should no longer hold the position.
“Listen, my take on Jay Powell is well known at this point,” she added. “He had two jobs. One is to deal with monetary policy. One is to deal with regulation. He failed in both.
Other legislators are also intervening. On “Face the Nation,” Rep. Patrick T. McHenry (RN.C.), chairman of the House Financial Services Committee, said that while Warren’s interview was the first he’d heard of a proposal to lift the deposit insurance cap, he did not rule out the possibility. McHenry noted that the FDIC raised its deposit insurance limit from $100,000 to $250,000 in 2010, after the last financial crisis.
“I haven’t had a single conversation with the White House or the administration regarding (changing the level of) deposit insurance,” McHenry said. “What I’m going to do, though…is determine whether or not we should adjust the FDIC filing level.”
On NBC’s “Meet the Press,” Senator Mike Rounds (RS.D.), a member of the Senate Banking Committee, suggested the $250,000 deposit cap wasn’t high enough, citing the ‘inflation.
“When we talk about allowing a bank to fail, it is one thing to say that it is acceptable to allow the owners of a bank to lose their resources. It is another thing to say that depositors should necessarily be allowed to lose their deposits,” Rounds said. “That’s why we’re starting with a quarter million dollar protection. It may not be enough. »
Warren’s proposal comes a week after federal authorities announced they would protect all deposits of two failing banks – Silicon Valley Bank and Signature Bank of New York – to stabilize and bolster public confidence in the US banking system. . But the collapse of the banks has also reignited fights over federal banking regulation.
On Friday, Biden called on Congress to impose tougher penalties on senior bank executives whose mismanagement contributes to the failure of their institutions, saying the current law limits his administration’s power to hold bank executives to account when their institutions fail and go into FDIC receivership, as Silicon Valley Bank did about a week ago.
Biden has asked Congress to expand the FDIC’s authority to impose harsher penalties on the executives of these banks, including barring them from accepting other banking jobs, imposing fines and seeking their remuneration.
That compensation should include gains from stock sales, the White House clarified later Friday, noting that Silicon Valley Bank chief executive Greg Becker had sold $3.6 million worth of company stock. days before the bank collapsed.
Under current law, the FDIC can only fine bank executives who engage “recklessly” in a pattern of “dangerous or unhealthy” practices. The federal agency can also bar executives from taking jobs at other banks only if they show a “willful or continuing disregard for the safety and soundness” of their bank.
“Congress should strengthen this tool by lowering the legal standard for imposing this ban when a bank is placed in FDIC receivership,” the White House said Friday. “The president thinks that if you’re responsible for one bank failing, you shouldn’t be able to just turn around and run another one.”
Azi Paybarah contributed to this report.
Washington
