According to Bloomberg News, U.S. officials are considering options to temporarily expand Federal Deposit Insurance Corp. (FDIC) coverage to all deposits. Staff from the U.S. Treasury Department are exploring whether federal regulators have enough emergency authority to insure deposits above the current $250,000 cap on accounts without the consent of Congress.
One legal framework being considered for expanding FDIC insurance would rely on the Treasury Department’s authority to take emergency action and make use of the Exchange Stabilization Fund. This move is not seen as necessary at present, as regulators have already taken steps to help banks manage withdrawals. However, officials are developing a strategy as a precautionary measure in case the situation deteriorates.
A coalition of banks has been advocating for broader government action to prevent a financial crisis. The health of midsize banks is also a concern after several banks, including Silicon Valley Bank, Signature Bank, and Credit Suisse, have failed. First Republic Bank is struggling to avoid the same fate, and its shares are down 90% since the start of the month.
White House spokesman Michael Kikukawa has stated that they will use the tools they have to support community banks, and deposits at regional banks have stabilized in recent days.
The Treasury Department has the authority to take emergency action via the Exchange Stabilization Fund, which is typically used for currency transactions and financing for foreign governments. The current banking crisis is the first since the 2010 Dodd-Frank Act reforms. While authorities do not see the expansion of FDIC coverage as a necessity yet, they are exploring all options to protect the safety of American deposits.