On November 18th, 2025, the House Committee on Financial Services conducted a hearing exploring options for deposit insurance reform.
Grover Norquist, President of Americans for Tax Reform, testified on the flaws associated with raising the deposit insurance limit and the resulting burden taxpayers and financial institutions would face.
Throughout the hearing, Norquist spoke out against the proposed Main Street Depositor Protection Act, which would raise the FDIC’s deposit insurance limit from its current $250,000 to $10,000,000 for noninterest-bearing transaction accounts at banks and credit unions with under $10 billion in assets. Proponents of the bill claim they want to level the playing field for smaller banks and individual depositors by protecting them against large deposit outflows.
The bill would, in fact, do the opposite.
The Main Street Depositor Protection Act and similar bills brought up during the hearing would increase moral hazard, fuel systemic risk, and reward rent seeking by codifying special privileges for a particular segment of the banking industry.
A study demonstrated that less than 1% of bank accounts exceed the $250,000 FDIC insurance limit.
Private market solutions for large depositors already exist. Tools such as reciprocal deposit networks and sweep accounts allow market participants to insure their deposits even if they exceed the current limit.
Raising the deposit insurance limit would not benefit most Americans and instead would shoulder large banks such as G-SIBs with billions in insurance premiums to subsidize a small minority of depositors.
Supporters of increased deposit insurance point to the 2023 wave of regional bank failures as reason to raise the deposit insurance limit. However, the 2023 crisis was the result of miscalculated risk-taking by the affected banks, such as Silicon Valley Bank (SVB).
Regulators at the Federal Reserve noted numerous issues with SVB’s liquidity and heavy losses on their bond portfolio. Despite posting several red flags, the Fed never followed up, and no one wound up being fired or investigated for oversight failure. Increasing deposit insurance would amplify moral hazard.
Under the regime proposed by proponents of deposit insurance reform, banks would be more willing to engage in risky behavior, increasing the likelihood of more failures and the cost of cleaning up failed banks in the future.
Norquist debunks the notion that deposit insurance is in need of reform by mentioning that American banks already have the largest deposit insurance seen anywhere in the world.
When asked to provide an alternative to raising the deposit insurance limit, Norquist advocated for further deregulation to enable banks to offer reciprocal deposits and other private market solutions.
This would take the burden of funding deposit insurance off the hands of the taxpayer, and limit moral hazard stemming from government backed guarantees.
Under this regime, market discipline would not risk dilution by extending taxpayer-backed insurance guarantees greater market cooperation between depositors and banks without the oversight of the federal government would enable solutions.
Mr. Norquist also highlighted the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act for its role in helping to deregulate access to reciprocal deposits and allowing for the private deposit insurance market to grow to meet the needs of both banks and large depositors.
Grover Norquist’s full written testimony can be read here.
