Will US consumers have to bail out struggling banks?

David Lightman, McClatchy Washington Bureau on

Published in Political News

WASHINGTON — Could taxpayers wind up bailing out wealthy customers at banks such as Silicon Valley Bank, Signature Bank and others that are struggling?

Depends on who you ask.

The White House and fellow Democrats are adamant that taxpayers won’t feel such pain.

“No losses will be borne by the taxpayers. Let me repeat that: No losses will be borne by the taxpayers,” President Joe Biden said after the two California banks failed.

Congressional committees plan hearings this week on the trouble at Santa Clara-based SVB and New York’s Signature Bank. On Tuesday, the Senate Banking Committee plans to hear from top federal regulators, and on Wednesday, the House Financial Services Committee will examine the issue.

What concerns many Washington lawmakers is that if the FDIC continues the practice of compensating all depositors, or if several banks teeter at once, a lot more money would likely be needed.


And that, said many Republicans, would mean consumers could get hit with higher costs. They worry that the financial institutions would pass on their higher fees and costs to consumers and that smaller, healthier institutions would wind up bailing out less responsible banks.

Consumers “are bailing out the banks when FDIC insurance coverage is extended to large deposits,” said Rep. Tom McClintock, R-Calif. “Ultimately that is spread directly to all bank depositors through higher fees. That is a bailout.”

And, tweeted Senate Banking Committee member Cynthia Lummis, R-Wyoming, “it is outrageous to ask Wyoming community banks to foot the bill for the bailout in the form of higher fees.”

Currently, deposits are insured up to $250,000 for each account by the Federal Deposit Insurance Corporation’s deposit insurance fund.


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