Warren says $250,000 cap in deposit insurance for banks should be reexamined

Sen. Elizabeth Warren (D-Mass.) on Wednesday said the $250,000 cap on deposit insurance should be reexamined to better suit small business and nonprofit organizations.

“I think that we should reexamine, just overall, about why we have limits at $250,000 of protection,” she said on CNBC’s “Squawk Street.”

The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 for each depositor if a bank fails. Warren said this insurance was meant for individuals, and a similar level of protections would help small businesses and nonprofit organizations have more confidence when depositing money into a bank.

“Some small business, some nonprofit, needs a place to manage its money,” she said. “They need to be able to make payroll, they need to be able to pay the utility bills, and they need a safe place to have that money where somebody’s going to keep it safe.”

“They shouldn’t be in the business of having to examine the books of the bank to say ‘I’m worried that this bank is a little too risky’ or ‘I’m worried that another bank has has taken on a certain kind of risk,’ ” she continued.

Warren and Rep. Katie Porter (D-Calif.) introduced a bill to place banks with at least $50 billion in assets back under strict Federal Reserve oversight and make them subject to Dodd-Frank Act stress tests. This would repeal a Trump-era banking regulation rollback that raised the threshold to $250 billion, exempting dozens of banks — including Silicon Valley Bank and Signature Bank — from the strongest federal oversight.

Silicon Valley Bank was taken over by federal regulators on Friday and marked the biggest bank failure since the 2008 banking crisis. Warren on Wednesday repeated her belief that the banks would not have collapsed if the regulations had not been rolled back.

“What we have is a problem that starts with Congress by opening the door to weaker regulations then goes to the regulators that very much weakened those regulations, and then to the executives who thought that you could run a bank like any other business and that they could load up on risk in order to improve profitability for the shareholders and boost their own salaries and bonuses,” she said.

“We have to shut that down. Shutting that down starts with Congress, tightening up regulations to begin with,” she added.

Warren wrote an opinion piece published in The New York Times on Monday echoing similar sentiments, saying Congress was to blame for “entirely avoidable” bank failure.