Lawmakers Call for Higher Deposit Insurance Limits for Big Banks

Core Viewpoint - There is a bipartisan push to increase the insured deposit limit from $250,000 to $10 million to prevent bank runs, particularly in light of recent collapses like Silicon Valley Bank and Signature Bank [2][3][4]. Group 1: Legislative Efforts - Treasury Secretary Scott Bessent and Senator Elizabeth Warren are advocating for raising the insured deposit limit [2]. - A Senate bill, co-sponsored by Senators Bill Hagerty and Angela Alsobrooks, proposes increasing the insurance limit to $10 million for specific accounts used by businesses [3][4]. - The proposed bill aims to address the types of accounts that were central to the 2023 bank failures, particularly those used for payroll and operational expenses [4]. Group 2: Impact of Recent Bank Collapses - Silicon Valley Bank had a significant number of uninsured deposits, with over 94% of its deposits being uninsured prior to its collapse [5]. - Following the collapse, the government intervened to ensure all depositors were made whole, which was an exception to the usual insurance policy [6]. - The proposed legislation would not extend additional insurance to larger banks, which would still be subject to the $250,000 limit for all accounts [6]. Group 3: Industry Reactions - Larger banks have expressed skepticism regarding the proposed $10 million limit, arguing that it may not enhance bank safety and resilience [7]. - Medium-sized banks are lobbying for legislative support following the deposit flight to larger banks after the SVB collapse, highlighting the rapid loss of depositor confidence in the digital age [8]. - The CEO of the Mid-Size Bank Coalition of America noted that the 2023 turmoil resulted in deposits moving from smaller banks to larger ones, creating an uneven playing field [8].