Politicians in Washington have the shortest memories. Maybe that’s why they so seldom learn from their sometimes catastrophic mistakes.
Less than 20 years ago, the U.S. economy was devastated by the mortgage and banking crisis. Experts claimed the odds of a housing market crash were tiny. They insisted that the federal housing agencies—Fannie Mae and Freddie Mac—would never need a bailout, and that mortgage-backed securities were as good as gold. Then, almost overnight, everything crashed spectacularly and devastatingly.
Banks began making riskier and riskier housing loans to subprime borrowers, while the government essentially covered the bets with 100% loan guarantees. One reason depositors and investors ignored the big banks’ high-risk lending strategy was because everything was guaranteed—by you and me.
Currently, accounts are insured up to $250,000, so most Americans don’t have to worry about the soundness of the bank where they store their hard-earned savings. We certainly don’t want bank runs like those in 1929. This safety net, designed to absorb systemic shocks, makes sense for everyday savers and investors.
But now there is a proposal to raise that taxpayer-insured limit to—drum roll, please—$10 million.
How many Americans have $10 million to deposit in the bank? Well, let’s see: There’s Bill Gates, Elon Musk, Taylor Swift, and a few others in the billionaire class.
Supporters from both parties claim this change will allow smaller community banks to more easily raise capital for lending and compete with the “Big Five” banks. That’s a worthwhile goal. But we should really call this latest proposal “the Billionaire Insurance Act.”
A recent study from the Cato Institute found that fewer than 1% of deposit accounts exceed $250,000—the level at which Federal Deposit Insurance Corporation coverage currently ends. So increasing that amount to $10 million means taxpayer-supported insurance for the deposits of not just the top 1%, but the top 0.01% of Americans.
But who will be watching over the banks? It’s one thing to have the proverbial fox watching the henhouse, but with these kinds of limits, NO ONE is watching except the federal regulators who were asleep at the switch in 2006, 2007, and 2008.
There is another reason why lifting the deposit insurance limits is foolhardy. We don’t want to encourage investors to seek safe harbor in risk-free investments. The millionaires and billionaires are the people we DO want to take risks with their fortunes. We want them to discover and seed-invest in the next Microsoft, Google, or Walmart.
Risk-taking is a virtue—it’s what built this country. But we want investors to make the big bets with their own money, not yours and mine.
Stephen Moore is a former Trump senior economic adviser and the cofounder of Unleash Prosperity, which advocates for education freedom for all children.
https://www.bostonherald.com/2025/10/29/moore-deposit-insurance-for-billionaires-no-thanks/
