A coalition of mid-sized US banks is asking the government to insure all deposits for the next two years after the emergency bailout of Silicon Valley Bank, which insured all of the firm’s deposits, regardless of size.
Driving the news: The mid-size bank Coalition of America sent a letter to regulators arguing that a temporary suspension of the FDIC’s deposit insurance limit was necessary to ensure smaller banks can weather the current banking crisis, Bloomberg reported.
- “This will immediately halt the exodus of deposits from smaller banks, stabilize the banking sector and significantly reduce the likelihood of further bank failures,” the letter said, according to Bloomberg.
- Tesla CEO Elon Musk also endorsed the idea in one go Twitter post early Saturday and said the move was necessary to “stop bank runs”.
Why it matters: After the sudden collapse of Silicon Valley Bank and New York’s Signature Bank, the spotlight has been on banks that could also be vulnerable to sudden outflows of deposits.
- The FDIC currently insures deposits up to $250,000, although the agency’s decision to protect SVP and Signature depositors indicates a broader willingness to support client funds.
- Separately, Bloomberg also reported that billionaire investor Warren Buffett was in touch with the White House, fueling speculation that he might provide financial backing to regional banks.
The recipients: According to Bloomberg, MBCA sent its letter to Treasury Secretary Janet Yellen, the FDIC, the Comptroller of the Currency and the Fed.
what we observe: Whether Washington is responding to growing calls to expand FDIC deposit protections. California Democratic Rep. Ro Khanna is preparing to introduce legislation removing the agency’s coverage cap, Dealbook reported Saturday.