The House Financial Services Committee’s November 18, 2025, hearing on “The Future of Deposit Insurance” was led by Chairman French Hill (R-Ind.), who immediately explained the cause of the bank failures that led to calls for an increase in the deposit insurance limit to $10 million.  He said, “Let’s be clear.  Deposit insurance was not the cause of those bank failures. They were the result of poor risk management by certain regional banks and the failure of federal and state supervisors to identify fixed problems that had already been focused upon by the examiner force.  No level of deposit insurance would have made up for the erosion of the failed banks identified deficient management decisions and the resulting impact on capital. The banks were insolvent and increased deposit insurance wouldn’t have fixed that.” 

Chairman Hill’s comments echo the Federal Reserve Bank’s April 28, 2023, review of its supervision of Silicon Valley Bank, which, as noted in Citizens Against Government Waste’s October 16, 2025, blog post, “determined that the proximate cause of the bank’s failure was lack of oversight of its business model by senior management and the board of directors; failure to manage liquidity risk or anticipate the potential for higher interest rates; and too many uninsured accounts.  The report concluded that Silicon Valley Bank was an outlier in an otherwise sound and resilient banking system that has adequate liquidity and capital and suggested that increased supervision by the Federal Reserve could help prevent a similar bank failure in the future.”  The blog post further noted that the Federal Deposit Insurance Corporation’s “mission includes maintaining stability and public confidence” in the U.S. financial system and its role in bank failures is after the fact.

These comments were reiterated in Council for Citizens Against Government Waste (CCAGW) President Tom Schatz’s November 17, 2025, testimony submitted for the record to the Financial Services Committee.  The statement noted, “Instead of helping stabilize smaller-sized banks as intended, a higher insurance limit would also increase risk and moral hazard and raise the burden on taxpayers.”  The statement also cited the conclusion by Boston College Law Professor Patricia A. McCoy in her February 18, 2007, analysis of the moral hazards of deposit insurance that lower, not higher, insurance limits reduce moral hazard and force creditors to more closely review the business practices of the banks with which they do business. 

CCAGW also signed a November 17, 2025, coalition letter led by the Taxpayers Protection Alliance, (TPA) which was sent to the committee prior to the hearing.  The letter cited TPA’s estimate that “raising the deposit insurance cap of $10 million for all non-interest-bearing transaction accounts would … necessitate a $42 billion one-time special assessment of approximately $42 billion to recapitalize the Deposit Insurance Fund (DIF) to its statutory minimum.”   The letter noted that rather than increasing stability, the increase would increase moral hazard and fail to protect ordinary depositors.  One of the signers of the letter, Americans for Tax Reform President Grover Norquist, stated in his written testimony at the hearing that, “An expanded guarantee would magnify moral hazard, slow lending and economic growth, and expose taxpayers to unlimited backstop liabilities.” He also suggested that Congress should allow the marketplace to deter reckless decision-making at banks instead of adopting legislation or regulations that would allow them to avoid suffering the consequences of their rash actions.

 Hopefully for taxpayers, the House Financial Services Committee hearing will put an end to the push for legislation like S. 2999, introduced by Sens. Bill Hagerty (R-Tenn.) and Angela Alsobrooks (D-Md.) to raise the deposit insurance limit to $10 million.