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Braun co-sponsors bill to block Silicon Valley-related bank fees

INDIANAPOLIS (WISH) — Sen. Mike Braun on Thursday said he doesn’t want community banks to pay the bill to bail out two banks that failed late last week.

Since President Joe Biden’s Monday announcement, the Federal Deposit Insurance Corporation would refund all Silicon Valley Bank and Signature Bank deposits. Republicans have claimed bank customers will have to foot the bill in the form of higher fees to offset banks’ deposit insurance premiums. Braun, of Indiana, and fellow Republican Sen. Josh Hawley, of Missouri, have now filed legislation to prohibit banks from charging additional fees based on the FDIC’s actions this week. The bill also prohibits the FDIC from charging additional fees to banks with less than $10 billion in assets.

In an interview with News 8 for “All INdiana Politics,” Braun said the past week’s crisis is vastly different from the 2008 crisis. He said the unusual makeup of Silicon Valley Bank’s assets means it is unlikely to lead to a systemic breakdown of the nation’s financial system. Braun said his bill would not jeopardize the FDIC’s ability to replenish its insurance fund for the next crisis.

“This is just going to say one thing: Don’t hamstring all the well-behaving banks,” he said.

Whether customers will, in fact, face higher fees is hard to predict. Prof. Sarah Jane Hughes, who specializes in commercial law and banking at IU’s Maurer School of Law, said banks could theoretically raise fees if their premiums go up. She said that likely would require a financial meltdown of a much greater magnitude than the 2008 crisis. It also would depend on the kind of transactions in which an individual bank was engaged. At the very least, she said the bill offers reassurance to small banks and those who use them.

“By doing that, they’ve given some breathing room to community banks that maybe they need, maybe they don’t need,” Hughes said.

The bill also includes language to allow the FDIC to recover bonuses paid to bank executives for up to a year prior to its takeover of the banks. Hughes said this mirrors some aspects of federal bankruptcy law, though the language in Braun’s bill would be specific to banks.

Following the 2008 crisis, the 2010 Dodd-Frank bill required stress tests for any bank with at least $50 billion in assets. A 2018 law raised that threshold to $250 billion, above the amount held by Silicon Valley Bank and Signature Bank, a point Democrats have seized on this week. Braun said it might be worth lowering the threshold so long as it doesn’t impact regional and community banks.

“All INdiana Politics” airs at 9:30 a.m. Sundays on WISH-TV.