Magazine article American Banker

Allison Calls for Cutting Deposit Insurance Levels

Magazine article American Banker

Allison Calls for Cutting Deposit Insurance Levels

Article excerpt

Byline: Ian McKendry

WASHINGTON -- Former BB&T Chief Executive Officer John Allison, a top candidate for the next Treasury secretary, reiterated Tuesday that policymakers should consider eliminating or reducing the deposit insurance level.

"We could reduce deposit insurance significantly. Ninety-five percent of consumers in this country have less than $50,000 in the bank," Allison said during an interview on CNBC Tuesday.

The long-time banker said he favors scrapping deposit insurance altogether, but acknowledged that would be politically difficult. However, his remarks indicate that if he is tapped and confirmed as Treasury secretary, he might pursue reducing the insurance level.

"I am a banker, I like having a lot of deposits, but it is not good economically or fair to people to incent everybody to have their money in the bank," said Allison. "You want to incent them to buy some stocks and bonds."

Allison has made such arguments before, but they are getting new attention given his possible new role.

The deposit insurance level was raised to $250,000 for all accounts during the financial crisis as a way to increase confidence and liquidity in the banking system. The temporary increase was eventually made permanent by the Dodd-Frank Act of 2010.

Although that law was opposed by all but a few Republicans, higher deposit insurance levels is generally a bipartisan position. It remains to be seen whether Allison would be willing to take on that fight if he becomes Treasury secretary. …

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