WASHINGTON— Bipartisan lawmakers in the House and Senate on Wednesday introduced the Main Street Depositor Protection Act, legislation that would expand federal deposit insurance for noninterest-bearing transaction accounts to a level somewhere above the current $250,000 cap and up to $5 million, with the exact amount to be set by the FDIC and, possibly, NCUA.
An earlier Senate version of the bill would have raised the limit to $10 million, but the new approach lowers the ceiling and leaves the final threshold to regulators, POLITCO said.
First introduced in the Senate last October by Sens. Bill Hagerty (R-TN) and Angela Alsobrooks (D-MD), the measure was unveiled in the House for the first time Wednesday with sponsorship from Rep. Frank Lucas (R-OK), a notable development after the earlier proposal drew skepticism from some House Republicans. Supporters argue the bill is narrowly tailored to protect payroll and other operating accounts used by small businesses, while helping community institutions compete more effectively during periods of market stress, POLITICO reported.
Backers of the legislation say the proposal is designed to prevent a repeat of the flight-to-safety dynamic seen during the collapse of Silicon Valley Bank, when uninsured business deposits quickly fled smaller institutions. Hagerty told POLITICO the measure is aimed specifically at noninterest-bearing transaction accounts that many small businesses use for payroll, while Lucas said the bill would help FIs of all sizes continue serving as economic engines in their communities.
The measure comes as policymakers continue debating broader deposit insurance changes, with Treasury officials signaling support for targeted reforms for transaction accounts but not yet explicitly endorsing the new $5-million framework. POLITICO also reported that Rep. Andy Barr (R-KY) has introduced legislation to allow Treasury to establish emergency transaction account guarantee programs during crises, while Rep. Dan Meuser (R-PA) recently proposed indexing deposit insurance coverage to inflation.
DCUC Comments
The Defense Credit Union Council said it appreciates the growing bipartisan focus on strengthening depositor confidence and preventing destabilizing runs on community-based financial institutions.
"The lessons from recent market disruptions are clear: when uncertainty hits, liquidity and depositor trust must be preserved across the entire financial system not just for the largest institutions," stated DCUC Chief Advocacy Officer Jason Stverak. "That said, any effort to expand deposit insurance must be approached with one guiding principle: parity between banks and credit unions. Credit unions serve more than 145 million Americans, including millions of servicemembers, veterans, and their families, and operate under a distinct, member-owned, not-for-profit model. Policies that enhance depositor protections cannot tilt the competitive landscape or inadvertently favor one charter over another."
Stverak added that DCUC has long supported targeted, thoughtful reforms to the deposit insurance framework—particularly for transaction accounts that support small businesses, payroll, and mission-critical operations in military communities.
"Defense credit unions routinely serve as financial lifelines on installations and in underserved areas, where stability and access to funds are essential to financial readiness and national security," he said. "However, expanding coverage limits must be done in a manner that maintains safety and soundness, preserves the integrity of the share insurance system administered by the National Credit Union Administration, and ensures that credit unions are not disadvantaged relative to banks in either coverage or regulatory treatment. We cannot repeat a system where market assumptions or policy design push deposits toward institutions perceived as ‘too big to fail.’"
Ultimately, Stverak added, "Congress has an opportunity to modernize deposit insurance in a way that strengthens community institutions across the board. DCUC stands ready to work with lawmakers to ensure any final framework reflects fairness, stability, and full parity—so that credit unions can continue delivering for those who serve our country.”
ACU's Perspective
America’s Credit Unions President/CEO Scott Simpson said ACU’s initial reading is the bill explicitly gives the FDIC authority to set the new standard, while the NCUA’s role is less clear. He said there may be intent language suggesting credit unions would be subject to whatever framework the FDIC establishes, but the draft does not expressly grant comparable rulemaking authority to the NCUA.
“We absolutely want parity in any deposit insurance relief that’s extended to banks, and we supported this bill as originally introduced,” said Simpson. “But this version is drafted differently. It appears to be structured in a way that may help it move forward, and we’re being very careful about offering support until we have greater clarity on this specific provision.”
Simpson added ACU is "grateful for Congressman Andy Barr’s leadership in introducing a bill that would create a permanent Transaction Account Guarantee program that includes credit unions. Deposit protection gives people the peace of mind that boosts consumer confidence, helps keep the economy stable, and ensures institutions can effectively serve their members and communities even when things get tough. We appreciate that credit unions are included in this legislation and recognized as important parts of this framework. We look forward to working with Congress to move this important policy forward.”