Senator Elizabeth Warren is calling for more US deposits to be covered by federal insurance and demanding government probes into whether lax regulation fueled this month’s collapse of Silicon Valley Bank and Signature Bank.
(Bloomberg) — Senator Elizabeth Warren is calling for more US deposits to be covered by federal insurance and demanding government probes into whether lax regulation fueled this month’s collapse of Silicon Valley Bank and Signature Bank.
The comments this weekend from the Massachusetts Democrat, a frequent critic of the finance industry, raise the political pressure in an already tense situation. American officials are racing to calm nerves over the financial health of other US mid-sized banks.
“I think that lifting the FDIC insurance cap is a good move,” Warren, who’s a member of the Senate Banking Committee, said in a CBS News interview on Sunday, referring to the deposit insurance administered by the Federal Deposit Insurance Corp. A day earlier, she demanded that several inspectors general look into causes of the banks’ failures and if regulatory missteps played a role.
Warren has been at the forefront of blaming the Federal Reserve, financial regulators and former President Donald Trump for laying the groundwork for a crisis that took down Silicon Valley Bank, New York’s Signature Bank, and led a group of bigger firms to pledge $30 billion to help stabilize First Republic Bank.
Long a champion of tighter regulation, Warren on Sunday also amplified her criticism of Fed Chair Jerome Powell. She said in several interviews that he “took a flamethrower” to banking regulations.
A representative for the Fed didn’t immediately respond to a request for comment, nor did the central bank’s inspector general, whom Warren asked to conduct an investigation into the recent bank collapses.
Warren also asked on Saturday that the internal watchdogs of the FDIC and Treasury Department review the matter.
The FDIC declined to comment, while the agency’s inspector general said that it had received Warren’s letter and “is monitoring issues related to recent bank failures and will be reviewing them in coordination with law enforcement and audit partners.” A representative for the Treasury declined to comment and its inspector general didn’t immediately respond to a query.
“The bank’s executives, who took unnecessary risks or failed to hedge against entirely foreseeable threats, must be held accountable for these failures,” Warren said in her letter Saturday to the inspectors general. “But this mismanagement was allowed to occur because of a series of failures by lawmakers and regulators,” she said.
On Sunday, Warren focused on whether the US should increase its standard $250,000 cap for insuring deposits. A debate over the issue has been raging since US authorities last week said that they would ensure that all Silicon Valley Bank and Signature Bank depositors — including those over that cap — would be made whole.
“Now the question is, where is the right number on lifting it,” she said on “Face the Nation” on Sunday. “This is a question we’ve got to work through. Is it $2 million, is it $5 million, is it $10 million?”
Meanwhile, other lawmakers voiced caution, reflecting in part the challenge of passing legislation in a divided Congress.
“Well, it’s the first time I’ve heard a proposal like that,” House Financial Services Committee chair Patrick McHenry, a North Carolina Republican, told CBS. “And I have not had a single conversation with the White House or the administration about deposit insurance, changing the levels.”
Warren declined to say whether President Joe Biden’s administration is actively seeking to build support for raising the FDIC’s ceiling on deposit insurance. “I don’t want to talk about private conversations but I will say it’s got to be one of the options that’s on the table right now,” Warren told CBS.
She also called for accountability for bank executives, including clawbacks from former SVB Chief Executive Officer Gary Becker and lifetime financial industry bans for executives who were in charge at banks that failed.
–With assistance from Anna Edgerton, Ian Fisher, Viktoria Dendrinou and Jonnelle Marte.
(Updates with Warren letter demanding IG probes throughout)
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