(ConservativeHub.com) – The Treasury Department is looking into whether or not the Federal Deposit Insurance Corp. (FDIC) is legally able to provide expanded insurance to all bank deposits temporarily, according to Bloomberg News. Currently, the FDIC provides insurance for deposits that are up to $250,000. However, a group of banks is now pushing for the FDIC to guarantee all deposits for the next couple years in order to stop money from being withdrawn from small and midsize banks in favor of larger banks which many wealthy depositors deem more secure.
Federal regulators were recently called to protect Silicon Valley Bank depositors after the bank collapsed. This led to many other regional banks having their customers withdraw a high number of uninsured deposits.
Treasury Secretary Janet Yellen stated that similar emergency protection would not be given to institutions of smaller size that do not threaten financial stability.
During the American Bankers Association conference, she also noted that the actions taken were not aimed at helping “specific banks or classes of banks,” but rather that it was a necessary action in order to preserve the banking system at large. She added that actions like it might only be needed if less sizeable banks “suffer deposit runs that pose the risk of contagion.”
Currently, the FDIC insurance limit is determined by Congress and it is unclear whether the FDIC can extend protection without the approval of lawmakers. Lawmakers have recently looked into the possibility of increasing or waiving the limit in the short-term, but no decisions have been made yet.
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