Consumer Watchdog Group Slams Raising Deposit-Insurance Limit

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

March 23, 2023                                                                       

WASHINGTON, D.C. – As lawmakers from both parties consider proposals on raising the deposit-insurance limit, the Taxpayers Protection Alliance (TPA) expresses serious concerns. Under the guise of helping select consumers, all banking customers would see banking costs increase and be harmed by plans to increase or expand the current cap of $250,000 on deposit insurance.

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

“Raising the deposit insurance limit is not the solution because consumers will unfortunately be on the hook for higher bank fees. The Federal Deposit Insurance Corporation (FDIC) Deposit Insurance Fund (DIF) is funded through fees paid by Insured Depository Institutions, such as banks or brokerages for retirement accounts. To cover higher deposit accounts, these fees will have to be increased on all banks and passed on to all consumers. Unfortunately, this will result in consumers forking out the extra cost for continued banking services. Checking account and credit card fees will invariably increase to cover these added costs, a devastating financial move for people just trying to make ends meet on limited budgets.

“The median transaction account balance sits at a little over $5,000 for the average American. The proposals to increase insurance to more than $250,000 currently being discussed would not benefit those Americans and cater to a limited number of high deposit account holders. Levying fees on American banks to fund enhanced deposit-insurance for a limited number of high dollar accounts is regressive and would harm far more consumers than it helps.

“This all goes without mentioning the inherent moral hazard associated with increasing deposit insurance limits. Banks must be accountable to their depositors and make responsible decisions. Subsidizing reckless investments by banks and taking skin out of the game for high dollar account holders will only introduce more chaos into the system.

“TPA urges lawmakers to avoid any proposals that would raise the deposit insurance limit. Lawmakers should instead practice fiscal responsibility and focus their efforts on issues like taming inflation. Once again, too many in Congress are out of touch with reality and ready to bail out the wealthy.”

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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.