The Federal Deposit Insurance Completion Act of 2023: A Simple System of Universal Deposit Insurance

Abstract

This brief paper and accompanying draft legislation update the Federal Deposit Insurance system by removing all coverage caps while retaining the rational risk-priced premium-assessment system introduced by the Federal Deposit Insurance Company Improvement Act of 2005. I argue that the cap removal completes the reform begun in 2005, while also reversing the past several decades' movements toward (a) ever-greater concentration and (b) destabilizing 'shadow banking' in the nation's financial system. The change also will foster, I argue, a return to the sector-specific industrial banking and credit unionization characteristic of our earlier industrial eras. As our republic now embarks on a grand national project of industrial renewal along green-friendly lines, such a move looks as salutary as the recent collapse of Silicon Valley Bank (SVB) shows it to be necessary.