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The FDIC board will move to settle a multibillion-dollar question later this morning when it considers a special assessment to repair losses sustained after backstopping uninsured depositors in back-to-back regional bank failures.

The rescue of Silicon Valley Bank and Signature Bank customers, whose accounts overwhelmingly exceeded the FDIC’s $250,000 limit for individual deposit insurance, ripped an estimated $23 billion hole in the agency’s deposit insurance fund. By law, those losses need to be filled through a fee levied on banks, but the size of the assessment — and which institutions will have to pay up — has been the subject of intense lobbying and speculation for weeks.

Agency staff will provide an updated estimate on the deposit fund’s losses, which are contingent upon asset sales and other factors, as well as the structure of the proposed assessment at 10 a.m.

The Independent Community Bankers of America, in particular, went on the warpath as depositors pulled their funds from smaller institutions in favor of big banks, money market funds or other investment products. By their telling, their members had largely avoided the risky practices that ultimately contributed to Silicon Valley and Signature’s demise and were among those most harmed by the subsequent turmoil.

That case found a welcome audience with policymakers from both sides of the aisle. Now, they’re not especially worried.

“It’s pretty clear that there’ll be deference to the community banking sector, which wasn’t part of these large bank failures and bailouts,” ICBA’s Executive Vice President of Congressional Relations and Strategy Paul Merski told MM on Wednesday. “We’re more concerned with the ongoing traditional assessments and the FDIC’s thinking there.”

Last fall, months before Silicon Valley Bank was on anyone’s radar, the FDIC approved a plan to raise bank fees by two-hundredths of a percentage point to bring the deposit insurance fund back in line with its minimum threshold. The agency has asserted that it needs to pump the fund even further to better withstand a future financial crisis.

Depending on how things go with the debt limit impasse, that might come sooner than they’d like.

IT’S THURSDAY — Send tips, gossip and suggestions to Sam at [email protected] and Zach at [email protected].

Driving the day

Senate Banking has a hearing on cannabis banking at 9:45 a.m. …Senate Banking will vote on Jared Bernstein’s nomination to be chairman of the White House Council of Economic Advisers at 9:45 a.m. Votes will also be held for Ron Borzekowski for director of financial research at Treasury, as well as David Uejio and Solomon Jeffrey Greene to be assistant HUD secretaries … House Financial Services has an oversight hearing on SVB and Signature Bank at 10 a.m. … Fed Gov. Christopher Waller speaks at 10:30 a.m.

Trouble (and green shoots) in the debt limit talks — Our Sarah Ferris and Burgess Everett report that “possible signs of life have begun to emerge” on President Joe Biden and House Speaker Kevin McCarthy’s war over the debt ceiling.

“Senior Hill aides have agreed to start more in-depth talks on government spending — though Democrats insist those are on a separate track from raising the nation’s debt limit. Biden has said he’d take a ‘hard look’ at unspent Covid-19 aid money in the talks. A top White House adviser is laying out ideas for energy permitting reform — one of the GOP’s biggest debt limit priorities.”

— Meanwhile, Biden is starting to apply pressure in Republican swing districts. “This isn’t just a theoretical debate going on in Washington,” Biden said in a speech in Valhalla, N.Y., on Wednesday, per our Danielle Muoio. It will have a “real impact on real people’s lives.”

— Bloomberg’s Malcolm Scott and Enda Curran: “Global Finance Chiefs to Plot Escape Routes for World Economy”

Gary Gensler weighs in — “If the U.S. Treasury as an issuer were actually to default, it would have very significant, hard to predict and likely lasting effects on investors, issuers, and markets alike,” the SEC chair said during a virtual talk at a derivatives market conference in Chicago, per our Declan Harty.

Remember inflation? — The Associated Press: “Consumer prices in the United States accelerated in April after months of declines, with measures of underlying inflation suggesting that rising costs could persist for months to come.”

Talking Points

Sen. Tina Smith (D-Minn.) on Wednesday demanded JPMorgan Chase CEO Jamie Dimon provide her an explanation for why the bank served Jeffrey Epstein as a client even after his behavior was flagged by the bank’s compliance department, she said in a public letter to the Wall Street chieftain.

Smith — whose claims echo allegations made by U.S. Virgin Island prosecutors in a lawsuit against the bank — said in an interview that “there were – by my read — many, many clues that something bad was happening and they didn't appear to do much of anything at all.”

Smith’s letter marked the first formal probe a member of Congress has made into Epstein’s dealings with JPMorgan, which Virgin Island prosecutors claim facilitated the convicted sex offenders payments to modeling agencies and young women. Smith, who holds a seat on the Senate Banking committee, said she did not circulate the letter with other members and will await Dimon’s responses before escalating the matter.

“Sometimes with these letters, what is most effective is to just get them out there and get the questions out there. Then, based on what we learn, it can become part of a bigger strategy,” she said. “There are victims of this terrible behavior that are seeking relief and I want to be on their side.”

Regulatory Corner

I think, Icahn — The WSJ’s Ben Foldy: “Activist investor Carl Icahn disclosed that his investment company is under investigation by federal prosecutors and went on the attack against the short seller that likely spurred the inquiry, accusing it of “wantonly destroying property and harming innocent civilians.””

Another one — More from Declan: Two years into Chair Gary Gensler’s tenure, the SEC is not slowing down on the new rule train. Next Wednesday, the agency is set to consider a proposal related to clearing agencies’ recovery and wind-down plans, according to a meeting notice posted on the SEC’s website.

Crypto

Tough sledding — Our Eleanor Mueller: “House Democrats on Wednesday signaled they'll fight to protect the SEC's role in cryptocurrency regulation, as Republicans draft plans that could chip away at its jurisdiction … Democrats showed little appetite in curtailing the SEC's reach in the crypto market and raised questions about handing more authority to the smaller CFTC because of its funding constraints.”

— The Chamber of Progress, a trade group that’s frequently partners with large tech business like Google and Meta, sent a letter urging House Financial Services Chair Patrick McHenry (R-N.C.) and ranking Democrat Maxine Waters (D-Calif.) to craft new crypto rules even as Democrats – including Waters – question the need for market structure legislation.