Jamal Al-Farouq A U.S. congressman has asked the government to protect all bank accounts in the country, even just for a while. This is because some of the largest banks are not doing well, and it might cause people to take their money out of smaller banks too. He warned that it could be like a virus that spreads quickly unless something is done soon.
Congressman Blaine Luetkemeyer and Peter Orszag Agree
Congressman Blaine Luetkemeyer from the U.S who used to be a banker and is on the Financial Services Committee said recently that the government should make sure all bank deposits in America are safe temporarily.
Recently, some big banks like Silicon Valley Bank and Signature Bank went out of business. To protect the economy, the Biden administration and other people in power promised that all deposits at these two banks will be safe, even if they are more than the $250,000 limit that is usually guaranteed by the Federal Deposit Insurance Corporation. Mr. Luetkemeyer stated that this commitment would give everyone a feeling of trust.
If you don’t do this, people will start taking their money out of the smaller banks and moving it to large ones like JPMorgan’s that are too big to fail. This could make the small banks weaker while making the large ones even bigger. In the end, this isn’t going to be good for our financial system.
The congressman said that if we don’t stop and think carefully about the situation, something bad might spread across all banks. We need to stay calm and not let it get out of control.
A congressman suggested that the government could guarantee all bank deposits in the country for 6 to 12 months until banks are back on their feet. But then, he changed his mind and said maybe it should be 30 – 60 days instead.
Peter Orszag, the CEO of Lazard financial company said on Friday that regional banks have been relying on deposits without insurance. He suggested that the government should make it clear that uninsured deposits won’t be possible for a while. This means all deposits are insured now.
When asked if this would create a problem where banks feel that they can do risky things with people’s deposits, Orszag said “No, it won’t cause any problems.” He also made clear that even though there will be more rules in place, deposited money will continue to go to certain banks.
Congressman Luetkemeyer and Orszag think the federal government should guarantee all of our deposits in the country, but Janet Yellen (Treasury Secretary) said that it won’t happen. Although this is the case, she stated that the banking industry will stay strong.
Do you agree with this? Leave your thoughts in the comments!
