Deposits Work for Communities. Deposit insurance helps community banks put local deposits to work in local communities. Deposit insurance helps community banks attract deposits to fund consumer and small business loans, community development projects, mortgages, education assistance, small business start-ups, and other purposes.
Core Deposits. Core deposits are the primary funding source for community bank lending. However, the growth in core deposits is not keeping up with the growth in loan demand.
Curtailed Lending. A recent Kansas City Fed study suggested that this decline in core deposits in comparison to loan demand could eventually force community banks to curtail lending to small businesses, farmers, and other local customers, who may not have other places to turn for credit.
Divided Deposits. Core deposits are not growing because small businesses and other depositors are reluctant to keep all their money in local banks because of the deposit insurance coverage ceiling. AARP, and even the FDIC, advises depositors to use more than one institution to safeguard their funds.
Consumer Confidence. People should feel safe and secure depositing their funds in local banks, where their money can be used to support local lending and local economies. They should not have to spread their money around to institutions outside their communities.
Inflation Erosion. Deposit insurance coverage levels haven't been increased in more than 20 years. In that time, inflation has eroded its real value by more than half.
Raising Coverage. Legislation (H.R. 3717) is moving through Congress to raise deposit insurance coverage levels for individual accounts and retirement accounts, and to index those amounts for inflation. The legislation also would raise coverage of municipal deposits.
Too Big to Fail. Community banks are competing for deposits with big banks that can offer 100% protection by virtue of their "too-big-to-fail" status. Customers at community banks are offered no such protection.
Big Bank Competition. Some big players, like Citigroup's Salomon Smith Barney, are marketing $1 million in FDIC insurance coverage through ten affiliated banks, ten times the coverage available at community banks.
Please support the community banks and communities in your district and state by opposing any amendments to reduce the proposed FDIC coverage levels, and voting "Yes" on final passage of H.R. 3717.