SVB collapse: Influential lawmakers call to lift $250,000 cap on FDIC deposit insurance

Several influential lawmakers are pushing for the removal of the $250,000 limit on the Federal Deposit Insurance Corporation’s (FDIC) deposit insurance program in the wake of Silicon Valley Bank’s recent collapse. The lawmakers hope that by extending coverage to all depositors, confidence in the banking system can be restored and a calamity in the banking system can be prevented.

Democrats are leading the push, with Senator Elizabeth Warren calling for the lifting of the FDIC insurance cap on CBS’s ‘Face the Nation.’ Meanwhile, Senator Mark Warner said he is “open” to extending FDIC insurance for two years to deposits of all sizes, although he expressed concerns over encouraging excessive risk-taking.

However, not everyone is in favor of raising the insurance limit. Mark Calabria, former director of the Federal Housing Finance Agency, believes the cap should actually be lowered to prevent banks from engaging in risky behavior. He points out that the vast majority of depositors don’t even come close to the $250,000 limit and that there are already ways for coverage around it. Furthermore, expanding insurance could increase the size of the banking system and reduce monitoring of banks’ behavior.

Amid the ongoing debate over the FDIC insurance program, the First Republic Bank saw its shares fall 47% after S&P Global downgraded its credit rating.

Members of the conservative House Freedom Caucus have also voiced their opposition to any universal guarantee on bank deposits and any attempts to force unnecessary regulations or costs onto small and mid-sized banks who are not at fault in the crisis.

Overall, the debate over the FDIC insurance cap is far from settled, with competing arguments and concerns on either side.

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