Consumer Watchdog Group Reacts to FDIC Report

For Immediate Release                                                 Contact: Abigail Graham: (202) 417-7235

May 11, 2023                           

WASHINGTON, D.C. – On May 1, the Federal Deposit Insurance Corporation (FDIC) released a 75-page report detailing the insurance system and offering potential reforms to address the recent and historic bank failures. Unfortunately, despite the report’s length, the report is rather contradictory and vague. It does not offer the necessary needed reforms.

In response, David Williams, TPA President, offered the following comment:

“Despite the best efforts of the FDIC, the report falls short for offering real and necessary reforms to ensure bank failures (like Silicon Valley Bank) don’t happen again. This report falls into the same trap of believing strict government controls will solve deeply-rooted systemic issues. The suggestion of tight interest rate controls on banks exemplifies that problem. Any rate controls from a central government promotes poor allocation of resources and inefficiencies. Rather than solving a crisis, it would make another more likely.

“Also, like most regulatory approaches, the FDIC suggestion would impose costs that benefit the biggest banks. The report acknowledges premiums on deposit insurance will rise. The big banks can afford this, but smaller ones may be out of luck. This will lead to more concentration and greater fallout potential.

“The government cannot be the solution to every problem. In most instances, it is the problem itself. Lack of depositor awareness of alternatives is not sufficient justification for the government to adopt a more complex deposit insurance scheme.”

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Taxpayers Protection Alliance (TPA) is a non-profit, non-partisan organization dedicated to educating the public through the research, analysis and dissemination of information on the government’s effects on the economy.