TLH - Government should expand deposit insurance to protect against bank runs - Nelson Peltz

2023-03-20 15:23:54 ET

Given the current fears about the banking system, Trian Partners founder Nelson Peltz said Monday that the federal government should expand its guarantee to all bank deposits regardless of size in order to slow bank runs. However, he proposed that the Federal Reserve should charge customers for that insurance.

Speaking to CNBC, Peltz added that a broad shift of depositor money out of regional and small community banks to the three or four major banks in America is a "dangerous situation."

"I would put together a plan that applies only to U.S. banks in that the Fed gets an insurance premium for any money you leave in a U.S.-accredited bank over $250,000. So you’re creating income for the Fed, and in exchange for that they insure the overage," the investor explained.

He provided an example to illustrate his point: "If the CD rate is three percent, or whatever it may be, you're paying a percentage of that back to the government as an insurance premium knowing that your deposits are fully insured by the United States, and that should only apply to U.S. banks."

Looking at Monday's intraday action, the S&P 500 ( NYSEARCA: SPY ) ( SP500 ) +0.9% , the Nasdaq ( COMP.IND ) +0.2% and the Dow ( DJI ) +1.2% .

Related Banking ETFs were trending higher in Monday's midday session : The iShares U.S. Regional Banks ETF ( IAT ) increased ~ 3.5% in intraday action, the SPDR S&P Regional Banking ETF ( KRE ) jumped about 2.2 %, Invesco KBW Regional Banking ETF ( KBWB ) rose ~3% , First Trust Nasdaq Bank ETF ( FTXO ) +2.3% and SPDR S&P Regional Banking ETF ( KBE ) +2.4% .

Meanwhile, ETFs attached to the bond market slipped during the session : iShares 20+ Year Treasury Bond ETF ( TLT ) -0.85% , iShares 10-20 Year Treasury Bond ETF ( TLH ) -0.5% , iShares 7-10 Year Treasury Bond ETF ( IEF ) -0.61% , iShares 3-7 Year Treasury Bond ETF ( IEI ) -0.4% and iShares 1-3 Year Treasury Bond ETF ( SHY ) -0.18% .

More on the Bank Crisis

• Credit Suisse and UBS: Implications Of A Shotgun Wedding
• UBS upgraded to Buy at BofA as Credit Suisse takeover enhances scale
• Fed, ECB and four other central banks take 'coordinated action' to ensure dollar liquidity

Also read: Banks not facing 'systemic' issue - Goldman Sachs' Peter Oppenheimer

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