Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, called for major changes to federal deposit insurance during a hearing Wednesday, arguing that the current $250,000 limit for banks and credit unions leaves small businesses and local financial institutions vulnerable.
“During the Great Depression, millions of Americans lost their life savings as thousands of banks failed. In 1933, Congress created the federal deposit insurance framework, and depositors have not lost a penny of insured deposits in the 92 years since then,” Warren said. “But FDIC and NCUA insurance is currently limited to $250,000. Above that, customers may have to wait in line and hope to recover their funds.”
Warren noted that the 2023 failures of Silicon Valley Bank and Signature Bank prompted regulators to guarantee billions in uninsured deposits for large corporations, while small community banks in Oklahoma and Texas saw local businesses lose millions above the $250,000 cap.
Testifying before the committee, Bob Harrison of First Hawaiian Bank and Peter Rice of Hanscom Federal Credit Union supported raising coverage to at least $20 million for business transaction accounts. “$250,000 just does not seem to be enough,” Harrison said, while Rice warned that deposit flight threatens local lending since credit unions lend out 90–100% of deposits.
Warren urged lawmakers to adopt a “clear and simple” framework that levels the playing field for community banks and credit unions and ensures small businesses have a safe place to keep payroll and operating funds.
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