Alabama Taxpayers Shouldn't Be the Backstop for Wall Street Risks

Every few decades, Washington convinces itself that it has finally found a way to make banking risk-free. And every time, taxpayers end up paying the price.

It has happened once already. In 1980, Congress dramatically expanded federal deposit insurance. Banks, newly armed with the comfort of a government safety net, loosened lending standards and embraced speculation. The result was the Savings and Loan meltdown—a financial crisis so severe it wiped out hundreds of institutions and left taxpayers holding the bill. We learned then that when the federal government guarantees risky behavior, businesses take the bait.

Now, more than forty years later, some in Washington are dusting off the same playbook.

After Silicon Valley Bank failed in 2023, an institution whose mismanagement was well-documented—lawmakers didn’t ask how we could make banks more responsible.

Instead, Senator Angela Alsobrooks introduced the Main Street Depositor Protection Act, a bill that would supercharge federal insurance for certain business accounts from $250,000 to an astonishing $10 million. That is not a typo—a nearly 40-fold increase in taxpayer-backed coverage.

Let’s be clear about who benefits here: not your neighborhood hardware store, not the corner bakery, and not the family-owned business that makes payroll by the sweat of its brow. The average small business keeps roughly $12,000 in its account. Under current rules, more than 99 percent of business accounts are already fully insured. Main Street is protected. So, who’s clamoring for a $10 million guarantee?

Large corporations. Wealthy firms. Banks that want a fresh buffet of deposits without having to earn trust or prove financial soundness. S.2999 gives them exactly what they want: a no-questions-asked promise that Uncle Sam—and Alabama taxpayers—will bail them out if things go sideways.

Today, big depositors are a vital check on banks. They pay attention to risk, scrutinize balance sheets, and move their money if a bank gets reckless. That discipline forces banks to behave responsibly.

This bill eliminates that discipline entirely. If the federal government promises to insure $10 million deposits, why would anyone care about what a bank does with their money?

Why study its portfolio or worry about interest-rate exposure? The message becomes: go big, roll the dice, and if the gamble fails, Washington will clean up the mess.

That is how moral hazard is born. And once that door opens, history shows it doesn’t close quietly.

The last time Congress enlarged deposit guarantees, we soon witnessed hundreds of bank failures, chaotic markets, and billions in taxpayer losses. Back then, the increase was roughly 150 percent. This new proposal is nearly 4,000 percent. If we couldn’t absorb the consequences of the first leap, what makes anyone think we can stomach the second?

I urge Alabama’s senators, especially Senator Katie Britt, who serves on the Senate Banking Committee—to examine what is really happening here. This bill’s friendly title masks a dangerous truth: it is not about protecting Main Street. It is about protecting institutions big enough to influence Washington, while saddling working Americans with the cost of their mistakes.

The Main Street Depositor Protection Act is a Trojan horse. Inside is a sprawling expansion of federal guarantees, an invitation for reckless banking behavior, and a blank check drawn from taxpayers’ pockets. Alabama families shouldn’t be asked—again—to rescue corporations that refuse to police themselves.

We’ve seen where this road leads. We don’t need a sequel.

It’s time to slam the brakes on S.2999 before history repeats itself—and this time, with a far higher price tag.

Bob Fincher serves in the Alabama State Legislature representing House District 37. Bob He is not seeking reelection in 2026.

Opinions expressed are those of the author and do not necessarily reflect the views of the Alabama Gazette staff or publishers.