In recent weeks, a range of conservative and taxpayer-focused groups have warned against costly FDIC insurance expansion proposals now circulating in Congress:
American Action Forum: “Deposit insurance plays a vital role in financial stability, but its scope must be clearly limited and carefully designed. Calls to expand deposit coverage may be politically expedient during moments of market panic, but they threaten to erode the fundamental tradeoff between risk and accountability in the banking sector.”
American Consumer Institute: “History shows that increasing the deposit insurance cap raises the risks of a financial collapse. Even contemplating this sends the wrong message, emboldening Sen. Warren and her allies as they seek to turn banks into public utilities. We don’t need a bigger government backstop, and we don’t need subsidies for the rich.”
Americans for Tax Reform: “Expanding deposit insurance would only increase systemic risk, raise costs for consumers, and inhibit competition. Abandoning market discipline and shifting the tab to taxpayers to prop up unsound institutions should be avoided at all costs. The Hagerty-Alsobrooks bill is a blueprint for the next crisis. Lawmakers should reject bringing it to life.”
CASE for Consumers: “New legislation in Congress vows to protect Main Street, but the specifics suggest something else entirely. The proposal, called the Main Street Depositor Protection Act, would raise the Federal Deposit Insurance Corporation’s limit on certain accounts from $250,000 to as high as $10 million. It’s being sold as protection for small businesses and community banks, but upon closer inspection it’s little more than a safety net for the biggest bank accounts held by the top one percent of the top one percent.”
Citizens Against Government Waste: “The potential exposure of taxpayers to billions of dollars in bank bailouts should not be thrown into any bill without the opportunity for debate and amendments on the floor of the Senate and House. Fortunately, the effort was rejected, and the bill should be as well should it proceed beyond any committees.”
Coalition of 14 Organizations: “We are broadly concerned that expanding government deposit insurance is a Trojan Horse for increased regulation on the banking sector, morphing financial institutions into government-sponsored enterprises like Fannie Mae and Freddie Mac, as proponents of the idea have repeatedly called for…Raising the deposit insurance limit, including for business payment accounts, would directly contradict laudable attempts to deregulate the financial sector and protect taxpayers.”
David Burton, Heritage Foundation: “Taxpayers shouldn’t be subsidizing banks and large corporations. Nor should government be making bank failures more likely. But Congress just introduced bipartisan legislation that would do precisely that.”
Grover Norquist, Americans for Tax Reform: “Abandoning market forces and sticking taxpayers with the bill will make bank failures more likely. Higher insurance premiums mean less lending, higher borrowing costs and government-induced deposit outflows to pet banks. Lawmakers should say no to expanding deposit insurance.”
Jill Castilla, CEO of Citizens Bank of Edmond: “Raising the coverage cap 40-fold would invite moral hazard. Even well-intentioned banks could find ways to skirt the limits by offsetting non-interest restrictions through higher yields on other deposits, customer rebates or incentive programs that effectively extend insured benefits beyond their purpose. Such behavior would distort competition and weaken the discipline that deposit insurance is meant to preserve. No regulation can fully prevent that risk.”
National Taxpayers Union: “This newly introduced legislation would ultimately increase moral hazard, raise costs for consumers and taxpayers, and increase government involvement in the financial system. As you contemplate a markup schedule into 2026, we strongly urge you to avoid bringing this legislation forward absent significant changes.”
Pinpoint Policy Institute: “Supporters of a plan to raise the U.S. government’s deposit insurance limit 40-fold to $10 million for non-interest-bearing deposits claim it will protect small businesses and the financial system. Don’t be fooled. The bill in question, the Main Street Depositor Protection Act, isn’t about safeguarding deposits; it’s about expanding government power over banks, and ultimately, over you.”
Steve Moore: “Supporters in both parties claim this will allow smaller community banks to more easily raise capital for lending and compete with the “Big Five” banks. That’s a good goal. But we really should call this latest proposal “the Billionaire Insurance Act.’”
Taxpayers Protection Alliance: “Despite their best efforts, the bill’s sponsors can’t give away a huge government benefit and expect there to be no cost from it. S. 2999 will do what deposit insurance increases always do. It will disproportionately benefit the riskiest and weakest banks which will use the higher coverage to gamble on the taxpayer’s dime. It will worsen systemic risk, raise consumer costs, and threaten the President’s economic agenda. Congress should reject S. 2999.”
Tomas Philipson, former acting CEA Chair for President Trump: “Expanding deposit insurance to $10 million may sound like a technical reform, but it’s the opposite — a wrongheaded shift in the opposite direction toward more centralized control of banks. It replaces market innovation and discipline with political favoritism, substitutes self-reliance with moral hazard, and invites the next wave of costly financial bailouts. To protect Main Street, lawmakers must reject this highly regressive bill and stand by the principles that rebuilt America’s economy: limited government, market discipline, and accountability in risk-taking.”
Wall Street Journal Editorial Board: “Bad ideas never die, but they do get worse. An example is the embrace by the Trump Administration and some Republicans of the Elizabeth Warren idea to expand federal bank deposit insurance.”