GOP Caucus Opposes Guaranteeing Bank Deposits Above $250K

Image copyright: Reuters

The Facts

  • The Republican House Freedom Caucus on Monday issued a statement voicing its opposition to any universal federal guarantee of bank deposits more than the current limit.

  • Currently, the Federal Deposit Insurance Corporation guarantees bank deposits up to $250K. The GOP group wrote that insuring deposits of more than that amount “enshrines a dangerous precedent” that “encourages future irresponsible behavior” that then gets paid for by those who obeyed the rules.

The Spin

Pro-establishment narrative

At this time of shaky consumer confidence in the US banking system, the least the government could do is temporarily insure all deposits to prevent a dreaded bank run. Such a situation would lead to less competition while the big banks would get even bigger. After all, the smaller banks are not taking the same risks as the bigger ones, so they should not have to be put at risk.

Establishment-critical narrative

The government is propping up ultra-wealthy, politically-connected individuals at the expense of average Americans, and this has to stop. Universally protecting all deposits would be a moral hazard that would allow banks to continue their risky behavior without skin in the game. The FDIC is funded on the backs of bank customers. This attempt to protect the wealthy is nothing but another questionable bailout.

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