Musk strongly encourages the United States government to back all deposits in banks.
The billionaire says the move is “absolutely necessary” to stop bank runs.
Elon Musk has come up with a plan to fix the US banking crisis. The government needs to get rid of the current $250,000 insurance cap on all deposits to stop panicked customers from pulling out their money, the CEO of Tesla said in a tweet on Tuesday.
He said this in response to a news story that said US officials are looking into ways to temporarily insure deposits above the current limit without getting permission from Congress.
Musk wrote, “Absolutely necessary to stop bank runs.”
The US banking crisis started earlier this month when Silicon Valley Bank (SVB), a major US lender focused on the tech and startup sectors, suddenly went out of business. Over 92% of the bank’s deposits weren’t covered by insurance, and the bank was shut down by the government after a huge amount of deposits left. Signature Bank went out of business because of what happened to SVB. Customers in a panic have taken tens of billions of dollars out of smaller banks and put them with larger lenders.
Last week, the billionaire entrepreneur who runs Tesla, Twitter, and SpaceX came up with the idea. “Right now,” he wrote on March 18, “the FDIC needs to change to unlimited coverage to stop bank runs.”
All deposits made by customers of SVB and Signature Bank have been backed by the government. But a recent study shows that nearly 200 American banks face the same risks. Like many other banks, SVB put billions of dollars into US government bonds when interest rates were close to zero. When the Federal Reserve raised rates to try to stop inflation, SVB lost money.
When SVB and Signature Bank failed, it sent shockwaves through the whole US banking industry. The stocks of many other financial institutions have fallen, and the six biggest Wall Street banks have lost around $165 billion in market capitalization, which is about 13% of their total value. Moody’s outlook for the US banking system went from “stable” to “negative” last week, citing the “rapidly worsening operating environment.”
