WASHINGTON — The National Taxpayers Union is opposing legislation that would raise federal deposit insurance limits to $5 million, arguing the proposal would increase costs for banks and create inequities within the financial system.
In a statement, Tommy Aiello, vice president for federal affairs at the organization, criticized the Main Street Depositor Protection Act, which would increase the current $250,000 cap on deposits insured by the Federal Deposit Insurance Corporation by 2,000%.
The CU Daily had coverage of credit union trade group response to the legislation here.
The bill, introduced by Frank D. Lucas (R-OK) and Sen. Bill Hagerty (R-TN), would require larger banks above a certain asset threshold to contribute more to the deposit insurance fund to cover the expanded limits, while smaller institutions would not face the same burden.
‘Others Left With the Burden’
Aiello said the measure would effectively shift costs onto the largest banks while granting smaller institutions a government-backed advantage.
“The legislation amounts to one group getting a government-backed guarantee, while others are left with the burden,” Aiello said in the statement.
He also questioned the rationale behind the proposal, noting that Hagerty has previously floated higher insurance thresholds before settling on the $5 million level.
“The constantly shifting versions of the Main Street Depositor Protection Act suggest the proposal is not grounded in clear data or a consistent policy rationale,” Aiello said in a statement.
‘No Need for Increase’
Aiello argued there is no need to increase deposit insurance limits, citing estimates that roughly 99% of depositors already fall below the current $250,000 cap.
Instead of expanding coverage, he said Congress should focus on reducing regulatory burdens on financial institutions, allowing banks to devote more resources to serving customers.
The statement also warned that higher insurance limits could result in billions of dollars in additional fees for banks, costs that could ultimately be passed on to consumers.
Aiello said the legislation’s goal of helping community and regional banks compete with larger institutions relies on what he described as preferential treatment, rather than market-based solutions.
“Congress should not pick winners and losers in the financial sector when free-market options exist,” Aiello said.
