top of page
Search

Republicans want to hand over your savings to the big banks

For now, your bank deposits are guaranteed by the FDIC. Republicans want to privatize it and give the keys to the banks. What could possibly go wrong?

 

Extreme free market advocates call the FDIC, which guarantees the savings of small depositors, a “moral hazard during a financial crisis.”[1],[2] Somehow protecting the savings of tens of millions of Americans is a “moral hazard.”

 

But the real “moral hazard” comes from eliminating the FDIC and creating bank syndicates that police and insure themselves.[3] Again, what could go wrong?

 

Republican think tanks like the Heritage Foundation immediately attack the FDIC after each banking crisis.[4] These free marketeers posit that somehow less regulation would have prevented bank failures like the Silicon Valley Bank. 

 

Of course, they forget that the FDIC saved the small depositor’s savings in the Silicon Valley Bank.[5]

 

So, somehow the answer to bank failures is deregulation of the banking system starting by privatizing the FDIC.[6],[7] It’s not a new idea, but it’s recently gained traction among Republican policy makers and the banking industry.

 

During his Congressional testimony last December, JP Morgan Chase CEO Jamie Dimon doubled down on his position that the FDIC should be privatized as part of banking deregulation. Dimon said that he would “love to take it [FDIC] over, and take it off your hands and manage it ourselves.”[8]

 

It is a widely held myth that taxpayers fund the FDIC. But the reality is that the FDIC is funded by the banks themselves.[9] That’s why Dimon says that privatizing the FDIC would improve shareholder equity and returns.  As always, just follow the money.

 

The banking industry and trickle-down economists would dissolve the FDIC and replace it with a system of “private insurance.”[10] 


This “private insurance” would be obtained from groups of banks would form “syndicates” to bid for an individual bank’s deposit liability. [11] The banks would regulate themselves with their own rules driven by profit and shareholder returns. What could go wrong?


At the end of the day, the American taxpayer will be on the hook for the inevitable financial crises brought on by this Ponzi scheme.

 

Privatizing the FDIC may be good for the big banks. But it’s not good the rest of us.


 

 

 

[2] The Heritage Foundation also uses the term “moral hazard” when discussing the FDIC. Ref. 3.

 

 

 

 

 

 

 

 

 

 

8 views0 comments

Comentarios

bottom of page