The Federal Deposit Insurance Corporation (FDIC) is being touted as a rare agency that many Americans trust, but its future is uncertain under the new administration. Sources have revealed that President-elect Donald Trump’s allies are discussing dismantling the FDIC, giving Treasury oversight of deposit insurance, and allowing the federal government to substantially shrink or even close the rest of the agency.
Experts warn that such a move would pose an enormous risk to Americans about the safety of their deposits and trigger bank runs. The FDIC provides a safety net to protect customers in case their bank goes bust, with each depositor receiving at least $250,000 in insurance.
Critics argue that dismantling the FDIC would be a disaster for the American people, as it was instrumental in stabilizing the financial system during the 2008 crisis and preventing a second Great Depression. Industry experts also warn that consolidating banking regulators could backfire, leading to increased bureaucracy and making it harder to impose new rules on banks.
While there are concerns about the FDIC’s culture and the need for regulatory reform, lawmakers are unlikely to agree to shutting down the agency. After the 2008 financial crisis, lawmakers overwhelmingly rejected a proposal to consolidate bank regulators, and experts say that such an idea has historically had little support in Congress.
The move appears to be more of a not-so-subtle message to Trump appointees, warning them that if they don’t go along with the regulatory agenda, there could be economic consequences. Industry analysts argue that the FDIC is unlikely to be abolished under Trump, and that such a move would require 60 votes in the US Senate, a very tall order.
As the new administration takes office, Americans can rest assured that their deposits are insured, but also expect continued scrutiny of the banking industry’s regulatory framework.
Source: https://edition.cnn.com/2024/12/18/business/fdic-trump-bank-regulation/index.html