Congress will consider the need to raise the limit of federal bank deposit insurance

Lawmakers overseeing bank-related issues said they would consider raising the federal bank deposit insurance limit to prevent a financial crisis due to an exodus of large uninsured deposits from small and regional banks.

“I think raising the FDIC (Federal Deposit Insurance Corporation) insurance limit is a good step,” said Democratic Senator Elizabeth Warren.

Asked what the new, higher limit should be, Warren said: “That’s a question we have to work through. Will it be $2 million, $5 million? $10 million? Small businesses should be able to count on getting money to pay wages, to pay utility bills.”

Republican Senator Mike Rounds also questioned whether the $250,000 limit, which was increased from $100,000 during the 2008 financial crisis, is enough.

“It’s probably not enough,” Rounds said.

Republican Congressman Patrick McGarry said he would work on the adequacy of FDIC insurance, but added that he had had no conversations with Biden administration officials about raising the limit.

Democrat Chris Van Hollen, a member of the Senate Finance Committee, also told Fox News that Congress and regulators should decide whether to raise the deposit insurance limit, but not every bank should be “bailed out.”

“What the mechanism (for insuring deposits above $250,000) will be, if we do it at all, is a question that has yet to be discussed,” Van Hollen said.

Recall that during the financial crisis in 2008, the FDIC temporarily secured all deposits to save small banks.

Concerns over the outflow of deposits from medium and small banks continued Friday even though several large banks placed $30 billion in First Republic Bank, an institution affected by the collapse of Silicon Valley Bank (SVB) and Signature Bank.

Treasury Secretary Janet Yellen told senators last week that she, President Joe Biden and the vast majority of the Federal Reserve and FDIC boards would have to identify systemic risks to guarantee uninsured deposits at banks other than SVB and Signature Bank.

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