Senior House Republican Says Biden Administration Should Temporarily Guarantee All Bank Deposits Nationwide
The top House Republican demanded that the federal government temporarily insure all bank deposits at all national banks.
Blaine Luetkemeyer (Republican from Missouri) stated Tuesday that the government should guarantee all bank deposits for the time being to help maintain financial stability and prevent bank run. His comments are made amid controversy surrounding the government’s decision not to fully insure deposits of Silicon Valley Bank It collapsed last week.
“If you don’t do this, there’s going to be a run on your smaller banks,” Luetkemeyer told POLITICO. “Everyone’s going to take their money out and run to the JPMorgan’s and these too-big-to-fail banks, and they’re going to get bigger and everybody else is going to get smaller and weaker, and it’s going really be bad for our system.”
Luetkemeyer was a former banker, and is now a member of Congress’ House Financial Services Committee. Other Republicans in Congress include Reps. Matt Gaetz, R-FL, and Lance Gooden, R-TX, and Senators Josh Hawley, R-MO and J.D. Roger Marshall (R–KS), Tom Cotton, Vance (R–OH), and Tom Cotton (R–AR) among others have criticized the Biden government’s policy. They called it a bailout of large banks.
Luetkemeyer appeared to disagree. “The thought process here is that this is a contagion that could be spread across the entire banking system if it’s not contained and if people don’t stop and be calm about their assessment of the situation,” He said. “This is a Chicken Little situation. You know, the sky is falling. Everybody runs around like that, the whole thing’s going to implode.”
“So what you could do right now is that very same thing and say, hey, look, for another 12 months here or six months, we’re going to guarantee you every single deposit in this country and every bank until we get this interest rate situation resolved and these banks get back on solid footing,” He said. He mentioned that FDIC established a temporary policy that allowed deposit insurance to be increased beyond the $250,000 limit after 2008’s financial crises.
The Republican later changed his mind, stating that the policy would only last 30 to 60 calendar days.
FDIC Announcement Monday: It would insure all Silicon Valley Bank depositors following its collapse late last week. “Depositors will have full access to their money beginning this morning, when Silicon Valley Bridge Bank, N.A., the bridge bank, opens and resumes normal banking hours and activities, including online banking,” The FDIC stated in a statement. “Depositors and borrowers will automatically become customers of Silicon Valley Bridge Bank, N.A. and will have customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before. Silicon Valley Bank’s official checks will continue to clear. Loan customers should continue making loan payments as usual.”
“The transfer of all the deposits was completed under the systemic risk exception approved [Sunday],” The FDIC was also added. “All depositors of the institution will be made whole. No losses associated with the resolution of Silicon Valley Bank will be borne by taxpayers. Shareholders and certain unsecured debt holders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”
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