|
Getting your Trinity Audio player ready...
|
***
One adage always seems to prove correct in politics, especially when liberals in Washington are subtly trying to expand Big Government: When someone shows you who they really are, believe them.
Consider, for example, legislation in Congress billed as “protection for Main Street,” that would raise bank deposit insurance coverage for business transaction accounts to $10 million.
Senator Elizabeth Warren and other DC liberals say the bill is needed to help small businesses. Warren says these include “a small-town dentist, a landscaping company, or a bakery.” If you think, “I don’t know any bakers or landscapers or dentists with $10 million sitting in the bank,” well, I don’t either. In fact, more than 99 percent of all bank accounts have less than $250,000, the current deposit insurance limit.
They say the proposal is needed to help “smaller banks that serve Main Street,” but the fine print shows the bill would benefit banks with hundreds of billions of dollars in assets apiece. Actual small-town bankers have objected to the plan, warning that it encourages banks to take greater risks inviting taxpayer-guaranteed bailouts while also raising customer fees and reducing credit for the very small businesses it claims to help.
Of course, it isn’t hard to see why big business lobbyists and their friends in Congress are excited about the bill. But why would liberals, who claim to be looking out for the little guy, be just as enthusiastic?
***
This is where it pays to remember the adage about believing politicians when they show you their true colors. Like a few years ago, when Senator Warren made an appearance on CNBC backing expanded deposit insurance, before admitting:
“If we are going to raise the FDIC insurance, we’ve got to make sure first that we’ve got steady regulation over those banks, more regulation over the banks.”
This is what my grandmother used to call, “Saying the quiet part out loud.”
You heard right, too. Just as critics fear, the proposal is really meant to expand Big Government through “more regulation.”
That reveals the Orwellian logic behind claims that this is meant to protect Main Street bakers, supposedly keeping $10 million in the bank. Make no mistake, this bill and the PR blitz about “protecting Main Street,” is an affront to South Carolina values.
Deposit insurance is meant to protect families, not big corporations. Large businesses can already buy extra insurance coverage in the private market if they need it. They should pay for their own protection rather than pushing for a taxpayer guarantee that would socialize the cost of bank failures onto the backs of working Americans.
Instead of rushing ahead with this cynically packaged legislation, we need a deliberate and data-driven approach. Let’s first conduct actual cost and risk estimates about the consequences of expanding federal exposure by more than a trillion dollars.
Let me say that again: “A Trillion Dollars.”
***
RELATED | S.C. GOVERNOR’S SPENDING SOARS
***
Let’s also examine the claim that it is better to make taxpayers backstop higher coverage for wealthier depositors rather than simply continuing to utilize widely available and effective market solutions. Policy makers need a lot more information before once again putting taxpayers on the hook.
In the meantime, we should also take a serious look at common-sense legislation in Congress that would reduce regulatory burdens for small-town bankers and revitalize community banking. That includes preventing bank regulators from selectively pressuring bankers to cut off customers involved in energy, mining, firearms, and other important industries that may be currently out of favor among the politically correct tastemakers in Washington.
Two possible paths are clear: A carefully reasoned and evidence-based approach that helps community banks thrive and avoid needless red tape, or a massive and costly new taxpayer guarantee for corporate depositors that would ensure more regulation from the same crowd that has already shown unrestrained enthusiasm for subjectively de-banking customers.
U.S. Senator Tim Scott is a great conservative leader for South Carolina and he can put this terrible idea to bed in his role leading the U.S. Senate Banking Committee.
We know where South Carolina stands.
***
ABOUT THE AUTHOR…
J. Gresham Barrett is a senior fellow at the University of South Carolina’s Darla Moore School of Business and former senior advisor to the executive director of the World Food Programme. A graduate of The Citadel military college, he represented South Carolina’s third congressional district in the U.S. Congress from 2003-2011.
***
SOUND OFF…
Got something you’d like to say in response to one of our articles? Or an issue you’d like to address proactively? We have an open microphone policy! Submit your letter to the editor (or guest column) via email HERE. Got a tip for a story? CLICK HERE. Got a technical question or a glitch to report? CLICK HERE.
