Recently, US Congressman Blaine Luetkemeyer requested Feds temporarily insure smaller bank deposits in the US. After many major banks collapsed worldwide, such as SVB and Silvergate Bank, he stressed that if the government does not insure smaller bank deposits, there is a high chance of a run on smaller banks. He also warned that this a type of disease which may spread across the banking industry, which would not be good at all.
Congressman warns of run on smaller banks
Blaine Luetkemeyer recently released a statement stating that the US government should temporarily insure the deposits of every smaller bank. He added that following the collapse of multiple major banks, including Signature Bank and SVB, the Biden administration and regulators should guarantee all the deposits at these two banks, even those which exceed the 250,000 USD FDIC deposit insurance limit, to prevent economic damage.
Pointing out that expanding the insurance limit will bring back confidence, Luetkemeyer said that if this is not done, there will be a run on smaller banks. Everyone will withdraw their money from these banks and run to JPMorgan, and these too-big-to-fail banks will get growing bigger, and every other bank will get smaller and weaker. This would not be good for the system.
The congressman added that it is more like a contagion which could spread across the banking industry if it’s not contained and if people do not stop and remain calm about their current situation. As the news outlet conveyed, Blaine suggested that the government could guarantee every single deposit in this country and every bank for 6 to 12 months until the interest rate situation is resolved and everything gets back on track.
Lazard’s CEO shares a similar view as Blian Luetkemeyer
As you know, US Congressman Blaine Luetkemeyer requested Feds temporarily insure smaller bank deposits in the US to prevent economic damage and boost the system’s confidence. Last Friday, during an interview with CNBC, Peter Orszag, the Chief Executive Officer of the Financial Advisory firm Lazard, shared a similar view. He said that regional banks have been relying on the business model for quite a long time that relies on uninsured deposits.
What are your thoughts on the statement given by Blaine Luetkemeyer? Should the US government ensure every smaller bank’s deposit? Let us know in the comments below. And if you found our content informative, share it with your family and friends.
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