SC deserves better than the Main Street Depositor Protection Act

I was serving in Congress, representing South Carolina’s 3rd Congressional District, when the 2008 financial crisis hit. I remember the feeling of panic across the entire country as millions lost their jobs, savings, and homes.
As a member of the House Committee on Financial Services, I worked day and night to find a solution that worked for American taxpayers and hard-working families. The Emergency Economic Stabilization Act, which temporarily raised the Federal Deposit Insurance Corporation (FDIC) deposit insurance limit from $100,000 to $250,000, was what came of that work. It not only helped restore faith in the banking system but also prevented a bad situation from worsening.
But less than two years later, Dodd-Frank, a colossal mistake, followed. The measure permanently increased the FDIC limit to $250,000 and imposed a host of new burdensome regulations on our banking system.
Now, in the aftermath of the Silicon Valley banking failure in 2023, there are once again calls in Washington for new regulations. This time, it’s in the form of S.2999, the Main Street Depositor Protection Act, which would increase the FDIC deposit insurance from $250,000 to $10 million for non-interest-bearing transaction accounts.
During my time in Congress, we grappled with this fundamental tension: how do you provide stability without creating the conditions for the next crisis? S.2999 gets the balance catastrophically wrong.
I understand that FDIC insurance levels need periodic updates to account for inflation and economic growth. This proposal, however, injects dangerous moral hazard into our banking system and paves the way for crushing new regulations.
Wealthy depositors, most typically sophisticated large businesses, have historically monitored their banks closely, serving as a watchful eye to ensure that they act responsibly with their deposits. This bill however removes market discipline, the very mechanism that keeps banks honest; sets up taxpayers to subsidize the deposits of the largest businesses in America; and is the opening salvo for the next wave of Congressionally approved overregulation of banks.
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What makes our country great is our economy and its backbone: free-market capitalism. As soon as the government becomes too involved with its overbearing rules and regulations, we run the risk of stifling our economy and at the end of the day, hurting the very people we are trying to protect: hard working families. 2010 gave us a roadmap for what comes next if this bill is successful. Dodd-Frank permanently increased deposit insurance but paired it with a new set of stifling regulations. S.2999 risks repeating this.
South Carolina is fortunate that one of our senator, Tim Scott, chairs the Senate Banking Committee and has oversight over this bill. Not only he, but the entire delegation must stand firm against this misguided legislation.
Main Street needs affordable credit and a stable economy while taxpayers need protection from bailouts, not policies that guarantee them.
Our state deserves better than what the Main Street Depositor Protection Act offers.
Gresham Barrett served as the U.S. Representative for South Carolina’s 3rd Congressional District from 2003 to 2011.