{"id":18919,"date":"2023-03-20T01:36:29","date_gmt":"2023-03-20T01:36:29","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/us-lawmaker-urges-government-to-guarantee-all-deposits-to-avoid-runs-on-smaller-banks-finance-bitcoin-news\/"},"modified":"2023-03-20T01:36:29","modified_gmt":"2023-03-20T01:36:29","slug":"us-lawmaker-urges-government-to-guarantee-all-deposits-to-avoid-runs-on-smaller-banks-finance-bitcoin-news","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/us-lawmaker-urges-government-to-guarantee-all-deposits-to-avoid-runs-on-smaller-banks-finance-bitcoin-news\/","title":{"rendered":"US Lawmaker Urges Government to Guarantee All Deposits to Avoid Runs on Smaller Banks \u2013 Finance Bitcoin News"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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A U.S. congressman has urged the federal government to temporarily insure every bank deposit in the country. Following the collapses of several major banks, he stressed that if the government does not do this, there will be a run on smaller banks. \u201cThis is a contagion that could be spread across the entire banking system,\u201d he warned.<\/strong><\/p>\n

Lawmaker Warns of Runs on Smaller Banks<\/h2>\n

U.S. Congressman Blaine Luetkemeyer (R-MO), a former banker and a member of the House Financial Services Committee, said last week that the government should temporarily insure every bank deposit in the country.<\/p>\n

His statement followed the collapses of several major banks, including Silicon Valley Bank<\/a> and Signature Bank<\/a>. To prevent economic damage, the Biden administration and regulators guaranteed all deposits at the two banks, even those exceeding the $250,000 Federal Deposit Insurance Corporation (FDIC) deposit insurance limit.<\/p>\n

Noting that expanding the deposit guarantee would \u201cgive the system confidence,\u201d Luetkemeyer was quoted by Politico as saying:<\/p>\n

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If you don\u2019t do this, there\u2019s going to be a run on your smaller banks \u2026 Everyone\u2019s going to take their money out and run to the JPMorgan\u2019s and these too-big-to-fail banks, and they\u2019re going to get bigger and everybody else is going to get smaller and weaker, and it\u2019s going really be bad for our system.<\/p>\n<\/blockquote>\n

\u201cThe thought process here is that this is a contagion that could be spread across the entire banking system if it\u2019s not contained and if people don\u2019t stop and be calm about their assessment of the situation,\u201d the congressman opined.<\/p>\n

He suggested that the government could guarantee \u201cevery single deposit in this country and every bank\u201d for six to 12 months until the \u201cinterest rate situation [is] resolved and these banks get back on solid footing,\u201d the news outlet conveyed. However, the publication noted that the congressman later changed his position, and a spokesperson for him stated that the guarantee could be in place for \u201cperhaps 30 to 60 days.\u201d<\/p>\n

On Friday, Peter Orszag, the CEO of financial advisory firm Lazard, shared a similar view in an interview with CNBC. \u201cRegional banks have relied on the business model that relied on uninsured deposits,\u201d he said, adding:<\/p>\n

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Here\u2019s what needs to happen at this point: the government needs to make explicit what a lot of people are assuming, which is that for the foreseeable future, uninsured deposits don\u2019t exist. Everything is insured.<\/p>\n<\/blockquote>\n

Regarding whether doing so will lead to a moral hazard where banks feel they can \u201ctake remarkable risks with depositors\u2019 money,\u201d Orszag insisted: \u201cI don\u2019t think it will create a moral hazard.\u201d While emphasizing that \u201cThere\u2019s going to be a lot more regulation,\u201d he noted: \u201cYou are going to see continued flow of deposit concentration.\u201d<\/p>\n

While some people, like Congressman Luetkemeyer and Orszag, have expressed the need for the federal government to guarantee all deposits in the country, Treasury Secretary Janet Yellen told the Senate Finance Committee on Thursday that not all deposits<\/a> will be guaranteed. Nonetheless, she insisted that \u201cour banking system remains sound.\u201d<\/p>\n

Do you think the federal government should guarantee all deposits? Let us know in the comments section below.<\/strong><\/em><\/p>\n

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\nKevin Helms <\/h6>\n

\nA student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

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Image Credits<\/b>: Shutterstock, Pixabay, Wiki Commons<\/em><\/p>\n

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Disclaimer<\/strong>: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com<\/a> does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.<\/p>\n<\/div>\n

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