The post The Dangerous Contradiction Within Higher Federal Deposit Insurance appeared on BitcoinEthereumNews.com. WASHINGTON, DC – AUGUST 18: The entrance to the Federal Deposit Insurance Corporation (FDIC) is seen on August 18, 2024, in Washington, DC. (Photo by J. David Ake/Getty Images) Getty Images More federal deposit insurance will weaken banks, depositors at banks, and the U.S. economy more broadly. Say what’s true repeatedly. To see the obvious contradiction in legislation meant to increase deposit insurance from $250,000 per account to $10 million per, simply look a little bit deeper into the details. The insurance is for non-interest-bearing accounts. Bank accounts that don’t pay interest speak loudly to the desires of the owners of those accounts. These are generally checking accounts. Owners of checking accounts want little to no risk. Call non-interest-bearing accounts what they are: money storage for everyday spending needs, debit cards, or just paying bills. By extension, banks logically take the desires of non-interest-bearing account holders very seriously. The money isn’t to be put at major or even minor long or short-term risk precisely because it’s expected to be easily accessible in penalty-free fashion as a consequence of no interest being paid on the funds. It speaks to the near total mismatch of proposed federal legislation meant to increase federal deposit insurance. The legislation implies that money placed in a checking account for everyday transactions is money that banks are routinely putting at risk. No, not at all. Which once again explains the lack of interest paid. Please think about this with substantially expanded FDIC insurance top of mind. Suddenly funds stored at banks for daily use, and that aren’t being put at risk for precisely that reason, would be federally insured as though they were. There are costs associated with such insurance. And as has been reported already, banks would be saddled with those costs through the payment of… The post The Dangerous Contradiction Within Higher Federal Deposit Insurance appeared on BitcoinEthereumNews.com. WASHINGTON, DC – AUGUST 18: The entrance to the Federal Deposit Insurance Corporation (FDIC) is seen on August 18, 2024, in Washington, DC. (Photo by J. David Ake/Getty Images) Getty Images More federal deposit insurance will weaken banks, depositors at banks, and the U.S. economy more broadly. Say what’s true repeatedly. To see the obvious contradiction in legislation meant to increase deposit insurance from $250,000 per account to $10 million per, simply look a little bit deeper into the details. The insurance is for non-interest-bearing accounts. Bank accounts that don’t pay interest speak loudly to the desires of the owners of those accounts. These are generally checking accounts. Owners of checking accounts want little to no risk. Call non-interest-bearing accounts what they are: money storage for everyday spending needs, debit cards, or just paying bills. By extension, banks logically take the desires of non-interest-bearing account holders very seriously. The money isn’t to be put at major or even minor long or short-term risk precisely because it’s expected to be easily accessible in penalty-free fashion as a consequence of no interest being paid on the funds. It speaks to the near total mismatch of proposed federal legislation meant to increase federal deposit insurance. The legislation implies that money placed in a checking account for everyday transactions is money that banks are routinely putting at risk. No, not at all. Which once again explains the lack of interest paid. Please think about this with substantially expanded FDIC insurance top of mind. Suddenly funds stored at banks for daily use, and that aren’t being put at risk for precisely that reason, would be federally insured as though they were. There are costs associated with such insurance. And as has been reported already, banks would be saddled with those costs through the payment of…

The Dangerous Contradiction Within Higher Federal Deposit Insurance

WASHINGTON, DC – AUGUST 18: The entrance to the Federal Deposit Insurance Corporation (FDIC) is seen on August 18, 2024, in Washington, DC. (Photo by J. David Ake/Getty Images)

Getty Images

More federal deposit insurance will weaken banks, depositors at banks, and the U.S. economy more broadly. Say what’s true repeatedly.

To see the obvious contradiction in legislation meant to increase deposit insurance from $250,000 per account to $10 million per, simply look a little bit deeper into the details. The insurance is for non-interest-bearing accounts.

Bank accounts that don’t pay interest speak loudly to the desires of the owners of those accounts. These are generally checking accounts. Owners of checking accounts want little to no risk. Call non-interest-bearing accounts what they are: money storage for everyday spending needs, debit cards, or just paying bills.

By extension, banks logically take the desires of non-interest-bearing account holders very seriously. The money isn’t to be put at major or even minor long or short-term risk precisely because it’s expected to be easily accessible in penalty-free fashion as a consequence of no interest being paid on the funds.

It speaks to the near total mismatch of proposed federal legislation meant to increase federal deposit insurance. The legislation implies that money placed in a checking account for everyday transactions is money that banks are routinely putting at risk. No, not at all. Which once again explains the lack of interest paid. Please think about this with substantially expanded FDIC insurance top of mind.

Suddenly funds stored at banks for daily use, and that aren’t being put at risk for precisely that reason, would be federally insured as though they were. There are costs associated with such insurance. And as has been reported already, banks would be saddled with those costs through the payment of billions more into the FDIC’s insurance fund.

It means banks will suffer twice: first through higher insurance costs, and second through a reduction in profitable lending. From this, readers can hopefully deduce that a needless cost imposed on banks would be paid for via reduced economic activity thanks to lending shrunken by federally mandated increases in insurance costs.

Returning to bank depositors, to presume that they won’t pay for increased deposit insurance is truly naïve. That’s because increased FDIC insurance on non-interest-bearing accounts will logically raise the costs for banks to host those accounts in the first place. Translated, fees associated with non-interest-bearing accounts will almost certainly increase to reflect the cost of insurance for accounts that, by virtue of them not paying interest, don’t require much insurance to begin with. The average household checking balance is $5,300.

Which brings us back to the legislation itself. To say it’s a solution in search of a problem insults understatement. Only it’s much worse. Since increased deposit insurance will raise costs for banks and bank customers alike, it will bring harm to both while sapping economic vitality by reducing the availability of money for an economy reliant on it.

Source: https://www.forbes.com/sites/johntamny/2025/12/02/the-dangerous-contradiction-within-higher-federal-deposit-insurance/

Market Opportunity
Dogechain Logo
Dogechain Price(DC)
$0.000005396
$0.000005396$0.000005396
-0.46%
USD
Dogechain (DC) Live Price Chart
Disclaimer: The articles reposted on this site are sourced from public platforms and are provided for informational purposes only. They do not necessarily reflect the views of MEXC. All rights remain with the original authors. If you believe any content infringes on third-party rights, please contact [email protected] for removal. MEXC makes no guarantees regarding the accuracy, completeness, or timeliness of the content and is not responsible for any actions taken based on the information provided. The content does not constitute financial, legal, or other professional advice, nor should it be considered a recommendation or endorsement by MEXC.

You May Also Like

‘Minimum $15 Price Surge Target’ Predicted For Ripple’s XRP as Sentiment Bottoms

‘Minimum $15 Price Surge Target’ Predicted For Ripple’s XRP as Sentiment Bottoms

Ripple's XRP showed signs of stabilizing on Thursday following a sharp, market-wide sell-off earlier this week.
Share
Coinstats2026/01/30 03:07
Fed rate decision September 2025

Fed rate decision September 2025

The post Fed rate decision September 2025 appeared on BitcoinEthereumNews.com. WASHINGTON – The Federal Reserve on Wednesday approved a widely anticipated rate cut and signaled that two more are on the way before the end of the year as concerns intensified over the U.S. labor market. In an 11-to-1 vote signaling less dissent than Wall Street had anticipated, the Federal Open Market Committee lowered its benchmark overnight lending rate by a quarter percentage point. The decision puts the overnight funds rate in a range between 4.00%-4.25%. Newly-installed Governor Stephen Miran was the only policymaker voting against the quarter-point move, instead advocating for a half-point cut. Governors Michelle Bowman and Christopher Waller, looked at for possible additional dissents, both voted for the 25-basis point reduction. All were appointed by President Donald Trump, who has badgered the Fed all summer to cut not merely in its traditional quarter-point moves but to lower the fed funds rate quickly and aggressively. In the post-meeting statement, the committee again characterized economic activity as having “moderated” but added language saying that “job gains have slowed” and noted that inflation “has moved up and remains somewhat elevated.” Lower job growth and higher inflation are in conflict with the Fed’s twin goals of stable prices and full employment.  “Uncertainty about the economic outlook remains elevated” the Fed statement said. “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.” Markets showed mixed reaction to the developments, with the Dow Jones Industrial Average up more than 300 points but the S&P 500 and Nasdaq Composite posting losses. Treasury yields were modestly lower. At his post-meeting news conference, Fed Chair Jerome Powell echoed the concerns about the labor market. “The marked slowing in both the supply of and demand for workers is unusual in this less dynamic…
Share
BitcoinEthereumNews2025/09/18 02:44
Why Even Great Restaurants Are Closing In 2026

Why Even Great Restaurants Are Closing In 2026

The post Why Even Great Restaurants Are Closing In 2026 appeared on BitcoinEthereumNews.com. The plight of restaurants in the UK and US in 2026 Lela London I am
Share
BitcoinEthereumNews2026/01/30 03:25