FOLKERTS: Ricketts should oppose reckless deposit insurance expansion

Nebraskans understand something fundamental about banking that Washington, D.C. seems to have forgotten: sound financial institutions are built on prudent lending and market discipline, not government guarantees. Yet Congress is now considering legislation that would dramatically expand FDIC deposit insurance to $10 million per account.

The proposal comes dressed in appealing language about protecting depositors and helping community banks compete. But strip away the rhetoric and you find something quite different: a federal subsidy for wealthy corporate depositors paid for by everyone else through higher banking costs and increased systemic risk.

Let's examine who benefits. Fewer than one percent of accounts exceed the current $250,000 FDIC limit. Furthermore, the limit applies separately to each account someone owns, savings and checking for example, and for a joint account the coverage is per account owner. In other words a married couple with both spouses’s names on their checking and savings accounts would have up to one million dollars in FDIC insurance. Clearly most of Nebraska's farmers, ranchers, small business owners, and families are already fully protected. The push to raise coverage fortyfold—from $250,000 to $10 million—serves only the wealthiest sliver of depositors, those with the sophistication and resources to manage their own risk.

The costs, however, fall on ordinary Nebraskans. Banks recover higher regulatory costs through reduced lending, higher fees, and lower interest rates on deposits. Nebraska families would effectively subsidize super-sizedinsurance coverage for multimillion-dollar corporate accounts they'll never hold.

This violates basic fairness, but it also creates dangerous incentives. When government shields people from risk, they take bigger risks. America learned this lesson painfully in 2008 when government-backed mortgages fueled reckless lending. We relearned it in 2023 when Silicon Valley Bank failed after making questionable decisions. Expanding deposit insurance to $10 million would turbocharge this dynamic.

Market alternatives already exist for sophisticated depositors who want full protection. Sweep programs automatically spread funds across multiple insured accounts. Treasury securities offer government backing without straining the deposit insurance system. These solutions work without imposing costs on Nebraska families or creating systemic moral hazard.

There's also a question of proper governmental role. The FDIC's mission has always been protecting ordinary depositors from bank failures—preventing the kind of devastating bank runs that wiped out families' savings during the Great Depression. That mission doesn't extend to shielding multimillion-dollar corporate accounts from any possibility of loss.

Senator Ricketts (R-NE) has built his career understanding business, risk management, and the importance of market discipline and knows that sound banking depends on accountability, not government safety nets that encourage recklessness. This deposit insurance expansion contradicts everything that makes Nebraska's financial sector strong.

In his position on the Banking Committee, Senator Ricketts should oppose this legislation firmly. Our banks don't need federal subsidies for the ultra-wealthy, and Nebraska taxpayers shouldn't be asked to fund them.

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Janell Folkerts of Lincoln is a small business owner who is active in local and national politics.