Hardline Republicans in the House of Representatives on Monday vowed to oppose any universal federal guarantee on bank deposits above the current $250,000 limit, throwing a major roadblock to a key tool regulators could deploy if bank runs re-emerge as financial confidence wobbles.
The Republican House Freedom Caucus said in a statement the Federal Reserve "must unwind" its extraordinary funding facility created on March 12 that allows banks to boost borrowing from the Federal Reserve to cover deposit outflows.
Some bankers and banking trade groups have asked for universal guarantees from the Federal Deposit Insurance Corp to weather the crisis touched off earlier this month by the failure of Silicon Valley Bank The Mid-Size Banks Coalition of America said in a letter to U.S. Treasury Secretary Janet Yellen and key regulators they should extend FDIC insurance to all deposits for two years to "restore confidence among depositors before another bank falls," echoing a similar step taken during the financial crisis that erupted in 2008. The group is identified as a political action committee by government transparency group OpenSecrets.org.
Paul Kupiec, a former FDIC, International Monetary Fund and Fed official, said the Fed's actions to provide liquidity were helping to calm markets and bank customers, but pressures from a widening interest rate mismatch between bank deposits and bonds and loans on bank books would continue.
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