SVB collapse: House Republican says US should insure all deposits after bank failure

OThe top Republicans are on the House Financial Services Committee On Tuesday, it was suggested that the United States temporarily insure every deposit made to a bank in the United States as a way for the country to increase its confidence. National banking system After the collapse Silicon Valley Bank Over the weekend

Blaine Luetkemeyer (Republican from Missouri) stated that the move would help smaller banks deal with the fallout of SVB collapse, as well as strengthen trust in U.S. finance system. Politico. Luetkemeyer’s proposal builds on the efforts of the Biden administration, and other regulators, that have already started insuring deposits at Signature Bank and SVB. Signature Bank also collapsed.

SVB COLLAPSE: MOODY’S SAYS SIX BANKS UNDER REVIEW FOR CREDIT DOWNGRADES

“If you don’t do this, there’s going to be a run on your smaller banks,” Luetkemeyer spoke to the outlet. “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 to really be bad for our system.”

Luetkemeyer’s remarks make him one the first Republicans to adopt a similar stance to President Joe Biden who called for a broad deposit insurance policy to reduce the fallout from the financial crisis. However, many Republicans have criticised the proposals and called it a bailout for large banks.

Luetkemeyer however is challenging the GOP line and comparing it to a “Chicken Little situation.”

“You know, the sky is falling. Everybody runs around like that, the whole thing’s going to implode,” He said.

Instead, lawmakers should consider the possibility of a bank collapse a possible. “contagion” He stated that the problem could spread to other parts of the country if the system isn’t stabilized and the problem isn’t contained.

Luetkemeyer mentioned a similar policy, which was in effect after the 2008 financial crisis. This program provided unlimited deposit insurance to any bank that exceeds the $250,000 limit.

“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.

SVB and Signature Bank both collapsed last week. Federal intervention was necessary to stop panic by providing financial support to uninsured deposits.

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SVB reported Wednesday that it had sold $21Billion worth of bonds, thereby confirming $1.8B in previously unrealized losses. That announcement sparked a frenzy among venture capital firms, which reportedly began advising clients to pull their money from Silicon Valley Bank — causing its stock to be thrust into a free fall.

Early Tuesday morning, regional bank stocks reported some recovery, including First Republic and Fifth Third Bancorp. These banks all saw increases despite experiencing their worst drop in over three years on Monday. First Republic It was up 20% KeyCorp reported an increase of 12% as of Tuesday morning.