Coalition of Taxpayer Watchdogs Send Letter Urging Congress to Oppose Federal Deposit Insurance Expansion

FOR IMMEDIATE RELEASE

Contact: Kara Zupkus (224) 456-0257

WASHINGTON, D.C. – Today, the Taxpayers Protection Alliance (TPA), National Taxpayers Union (NTU), and fourteen other groups sent a letter to Congress opposing a dramatic expansion of federal deposit insurance coverage. The letter notes that S.4198/H.R. 8087, the latest version of

the “Main Street Depositor Protection Act,” would give the Federal Deposit Insurance Corporation (FDIC) unprecedented authority to increase coverage for certain noninterest-bearing transaction accounts up to $5 million—a 2,000 percent increase.

In addition to increasing taxpayer exposure to risky practices, the proposal would require new reporting obligations across the banking system and compel the FDIC to establish mechanisms to monitor compliance with account eligibility requirements. These measures would impose additional regulatory burdens on financial institutions to support an unnecessary expansion of deposit insurance.

Ross Marchand, Executive Director of the Taxpayers Protection Alliance, offered the following comment:

“This reckless deposit insurance proposal is a costly solution in search of a problem. More than 99 percent of deposit accounts are already fully insured under the FDIC’s existing $250,000 cap, and businesses seeking additional coverage can readily access private-sector alternatives. Instead of strengthening the financial system, this legislation would crowd out private innovation, expand moral hazard, and saddle taxpayers and consumers with billions of dollars in new costs.

“TPA has repeatedly warned that dramatically expanding deposit insurance would force the FDIC to impose massive new assessments on banks, followed by billions of dollars more in higher annual premiums. These costs will not simply disappear nor be absorbed by financial institutions. They will be passed directly onto consumers through higher fees, lower returns on deposits, and reduced access to credit. At a time when policymakers should be removing barriers to lending and investment, this proposal would do the exact opposite, especially harming underserved and rural communities that depend on affordable access to capital.

“This proposal is an abdication of congressional responsibility that will put taxpayers on the line for massive bailouts. Lawmakers should reject this misguided expansion of federal power and put taxpayers and consumers first.”

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The 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 impact on the economy.