“Small businesses need to be able to count on getting their money to make payroll, to pay the utility bills,” she said. “Nonprofits should be able to do that. It’s not people who can examine the safety and soundness of their individual banks. That’s the job that regulators have to do.”
Warren, who was among a faction of Democrats who vocally opposed a 2018 law that rolled back key provisions of the 2010 Dodd-Frank law and weakened banking regulations, said lifting the FDIC insurance cap would be “a good move “, if it was done in context. with tighter rules for banks.
Big banks can get bigger as crisis swamps ‘too big to fail’ worry
In another appearance, on ABC’s “This Week,” Warren got more specific, saying she wants Congress to repeal a provision in the 2018 law that had loosened restrictions on banks with $50 billion or more in assets.
“These are the banks for whom the main regulator is the Federal Reserve Bank. And these are the banks that engaged in these risky practices that have ultimately … blown up at least three banks,” Warren said. “We need tough regulation. If you have more than $50 billion … you should be subject to stress tests and decent capital requirements and so on.”
A longtime critic of Federal Reserve Chairman Jerome H. Powell, Warren also said he needed to ensure the Fed halts its campaign to raise interest rates, citing factors such as the war in Ukraine and falling prices. The Fed’s next policy meeting is on Tuesday and Wednesday, with the interest rate announcement to be announced on Wednesday afternoon.
“Raising the interest rate does nothing to solve those problems. All it does … is put millions of people out of work,” Warren said.
She stopped short of saying she had advised President Biden to remove Powell as Fed chairman, but said he should no longer be in that position.
“Look, my views on Jay Powell are well known at this point,” she added. “He has had two jobs. One is to deal with monetary policy. One is to deal with regulation. He has failed on both counts.”
Other lawmakers are also weighing in. On “Face the Nation,” Rep. Patrick T. McHenry (RN.C.), chairman of the House Financial Services Committee, that while Warren’s interview was the first time he had heard of a proposal to lift the deposit insurance cap, he did not rule out the possibility. McHenry noted that the FDIC had raised its deposit insurance cap from $100,000 to $250,000 in 2010 after the last financial crisis.
“I have not had a single conversation with the White House or the administration about (changing the level of) deposit insurance,” McHenry said. “However, what I will do … is determine whether we should address the FDIC deposit level.”
On NBC’s “Meet the Press,” Sen. Mike Rounds (RS.D.), a member of the Senate Banking Committee, suggested the $250,000 deposit cap was not high enough, citing inflation.
“When we talk about letting a bank go bankrupt, it’s one thing to say it’s okay to let the owners of a bank lose their resources. It is another thing to say that depositors must necessarily be allowed to forfeit their deposits,” Rounds said. “That’s why we start with a quarter of a million dollars in protection. Maybe it’s not enough.”
Warren’s proposal comes a week after federal authorities announced they would protect all deposits at two troubled banks – Silicon Valley Bank and Signature Bank of New York – to stabilize and strengthen public confidence in the US banking system. But the collapse of the banks has also renewed battles over federal banking regulations.
On Friday, Biden called on Congress to impose tougher penalties on top bank executives whose mismanagement contributes to the failure of their institutions, saying current law limits his administration’s authority to hold bank executives accountable when their institutions fail and are placed into receivership under The FDIC, as Silicon Valley Bank did about a week ago.
Biden asked Congress to expand the FDIC’s authority to impose tougher penalties on executives at such banks, including barring them from taking other jobs in the banking industry, issuing fines and reclaiming their compensation.
That compensation should include gains from stock sales, the White House specified later Friday, noting that Silicon Valley Bank’s CEO, Greg Becker, sold $3.6 million in company stock days before the bank’s collapse.
Under current law, the FDIC can only fine bank executives who “recklessly” engage in a pattern of “unsafe or unsound” practices. The federal agency can also bar executives from holding jobs at other banks if they show “willful or persistent disregard for the safety and soundness” of their bank.
“Congress should strengthen this tool by lowering the legal standard for imposing this prohibition when a bank is put into the FDIC,” the White House said Friday. “The president believes that if you’re responsible for the failure of a bank, you shouldn’t just be able to turn around and lead someone else.”
Azi Paybarah contributed to this report.