The following is a media release from Sen. Elizabeth Warren’s office. She was elected by voters in the Commonwealth of Massachusetts to serve the state in Washington DC in the US Senate. She is a Democrat.
WASHINGTON DC – United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Committee on Banking, Housing, and Urban Affairs, today, December 16, released the following statement criticizing the Federal Deposit Insurance Corporation (FDIC) for issuing a final rule on brokered deposits that poses serious risk to the financial system:
“Following a multi-year effort to weaken key safety and soundness rules put in place after the 2008 financial crisis, Trump-appointed regulators have now gutted decades-old restrictions on certain banks’ ability to accept brokered deposits, opening up the floodgates for banks to rely on this risky source of funding even though FDIC research shows that they are correlated with higher risks of bank failures. Instead of undermining these critical protections at the behest of the banking industry, the FDIC Board should focus on maintaining financial stability and keeping consumers’ bank accounts safe amidst this ongoing pandemic,” said Massachusetts Sen. Warren.
Deposits are considered “brokered” when they are placed through a third-party rather than directly by individuals and businesses. Restrictions on the types of banks that can accept these deposits were put in place after the 1980s Savings and Loan Crisis during which banks’ reliance on these unstable deposits contributed to distress in the financial system.
The FDIC’s final rule will significantly limit the scope of these restrictions.