The Quiet Deposit Bill That Could Reshape Banking, Kill Stablecoins, and Boost Regional Banks Stocks

A dangerous idea is floating around the Hill right now that should terrify stablecoin disruptors. The idea is simple: raise FDIC deposit insurance protection on business transaction accounts so a company’s payroll does not live or die on a rumor of a bank failure. Simple yes, but the impacts could be large.

The last century of U.S. banking basically argues for it. Remember that Congress created the FDIC in 1933 to stop retail runs and restore confidence after thousands of bank failures. Coverage started tiny and grew over time, then in 2008 the limit jumped to $250,000 to steady nerves in a crisis, and in 2010 Dodd-Frank made that limit permanent. For a two-year window from 2010 through 2012, noninterest-bearing transaction accounts were insured in full to keep business payments flowing, a Dodd-Frank statutory program that replaced the FDIC’s earlier Transaction Account Guarantee Program (TAGP) that ran from 2008 to 2010. At its peak, the Dodd-Frank coverage exceeded $1.5 trillion of balances, while TAGP topped $800 billion. If banking crises are fires, deposit guarantees suck all the oxygen out of the room.

March 2023 reminded everyone why confidence is king, a phrase my friend and bank researcher John Maxfield made famous. Silicon Valley Bank was closed on March 10 after an unprecedented $42 billion was withdrawn on March 9 alone in mere hours. Signature Bank followed on March 12, and First Republic failed on May 1 before being “sold” to JPMorgan. Silvergate, heavily tied to digital-asset clients, had already announced a voluntary wind-down on March 8. Regulators invoked the “systemic risk” exception to protect all depositors at SVB and Signature, then levied a special assessment on banks to cover the cost. Confidence cracked, deposits fled, and the problem was liquidity, not necessarily credit although the two move hand in hand. You could debate causes, but one thing that is hard to dispute is that stronger deposit insurance for the right accounts likely would have tamped down the fire.

The Fed’s own post-mortem found that higher shares of uninsured deposits were strongly linked to larger outflows during those early March weeks, especially among large corporate clients. At Silicon Valley Bank, venture investors and founders moved in unison to pull operating cash, triggering a flee-for-all that drained liquidity almost instantly. Those depositors shifted toward the largest banks in a matter of days, rushing to the perceived safety of megabanks that are implicitly “too big to fail.”

Now back to today’s headline. Senator Bill Hagerty has filed an amendment that would insure up to $20 million per depositor in the aggregate across noninterest-bearing transaction accounts at banks and credit unions with less than $250 billion in assets. This coverage would be separate from the regular $250,000 cap. The amendment defines qualifying accounts as true payment accounts with no interest and immediate access, and directs the FDIC and NCUA to phase these balances into the “estimated insured deposits” denominator over ten years, with rules to prevent gamesmanship. Credit-union provisions mirror the bank language. A published plan in the Federal Register would be due within one year of enactment.

Why this is important. Small businesses cut the nation’s paychecks. There are about 34.8 million small businesses employing roughly 46% of U.S. workers. When a midsize or community bank fails on a Friday, a business that cannot access its transaction balance on Monday has a real problem. Raising coverage for business payment accounts is aimed directly at that cash-flow risk and at the “flight to megabanks” we saw in 2023. In the words of House Financial Services Ranking Member Maxine Waters’ press release, which also incorrectly claimed only “37 bank failures since 2007,” the goal is to protect small-business operating funds and level the playing field for community institutions.

What it would mean for the FDIC’s insurance fund. First, start with the baseline. As of March 31, 2025, the FDIC reports estimated insured deposits of $10.8 trillion, a Deposit Insurance Fund balance of $140.9 billion, and a reserve ratio of 1.31% A reserve ratio is basically a buffer, never meant to be fully covered, for what could be at risk. By law, that ratio cannot stay below 1.35% without a restoration plan. So if $1 trillion of new business-account balances were suddenly insured, holding the fund balance constant would pull the ratio toward 1.20%. The Hagerty proposal’s ten-year phase-in is designed to avoid that sudden drop. The FDIC precedent for this took place in 2023. Protecting uninsured deposits at SVB and Signature under the systemic risk exception led to a $16.3 billion special assessment to restore the fund. These were necessary evils to prevent a complete crisis of confidence in banks.

Now some scenario math, using FDIC’s Q1 2025 uninsured-deposit estimate of about $7.66 trillion: If 10%, 20%, or 30% of that became insured via this change, the newly insured amounts would be about $0.77 trillion, $1.53 trillion, or $2.30 trillion.

And the extra DIF needed to hold the 1.35% floor: about $10.3 billion, $20.7 billion, or $31.0 billion.

And that extra DIF for the FDIC’s long-term 2% target: about $15.3 billion, $30.6 billion, or $45.9 billion.

So banks will likely need to pony up a lot of cash to make this happen, which is why the ten-year phase-in exists. The key factor is that history shows targeted business-account guarantees are a proven way to stop runs without insuring everything. The TAGP and Dodd-Frank programs were both temporary, focused on payment accounts, and funded by participant fees. Unfair to the “good actor” banks that did not have trouble? Yes. But without confidence in the system, their value would almost certainly be much lower.

And speaking to value, what would a passing of this bill mean for bank stocks? Equity markets like lower run risk and more deposit stickiness. If small and midsize banks can tell CFOs their operating cash is protected up to $20 million, sticky primary balances rise, wholesale funding reliance falls, and net interest income becomes more predictable. In theory, this would also mean that some small-business accounts would migrate out of Bank of America or Citibank and into “smaller” banks. The current rule saying less than $250 billion likely funnels more deposits into the regionals and maybe into some smaller “community” banks, which in general are defined by having less than $10 billion in assets. Past FDIC research shows that banks participating in TAG retained their transaction deposits, while non-participants saw declines. The setup is supportive for regional-bank stock multiples, even if assessments tick up.

This is all very politically popular, and the frame is that it helps small business and community finance, not Wall Street, for once. Waters’ bill in the House pushes regulators toward the same goal, and has bipartisan echoes. Vice President J.D. Vance supported similar reforms in the Senate, and Treasury Secretary Bessent has signaled openness to targeted deposit-insurance changes. Soundbites aside, this would be a very good thing for the banking industry. Plus, keep in mind the $250,000 in 2008 has the purchasing power of about $400,000 today by CPI, higher if you adjust for the actual cost of living and operating for businesses.

Speaking of crypto, why this is a big negative for stablecoins. Payment stablecoins are not FDIC-insured. The FDIC has explicitly warned that insurance protects deposits at insured banks, not crypto assets. The March 2023 USDC depeg after SVB’s closure was a reminder that even “fully reserved” tokens can face liquidity stress when reserves are locked. If a $20 million insured ceiling covers the operating accounts businesses actually use for payroll and payables, the practical case for swapping into a dollar stablecoin to run domestic payroll largely disappears.

Enter tokenized deposits. Tokenized deposits are simply bank deposits recorded on a shared ledger. They remain liabilities of the issuing bank and, if the underlying account qualifies for the new $20 million coverage, would be insured on the same terms. The New York Fed’s Regulated Liability Network proof-of-concept confirmed that tokenized commercial bank deposits remain deposits in law. This is why JPMorgan and Jamie Dimon are pushing forward on tokenized deposits. They will functionally be the same thing, and they will also be tagged as “safer” because they will sit within the FDIC-insured system. Stablecoins, by contrast, sit outside that perimeter unless issued as actual deposit liabilities. In a $20 million-cap world, tokenized deposits would give businesses the on-chain settlement features some want, without leaving the insurance umbrella. A big win.

I have no idea if this will clear both chambers and land on the President’s desk. But it clears the only test that matters. It gives Main Street a win. It shores up the wall where confidence breaks first. It costs money, but not more than another March 2023. Phased in, it’s a fight the industry can afford. And if it becomes law, the battlefield shifts. Regional banks rally. Stablecoins lose ground. And the same politicians who rarely agree on anything will be onstage, claiming credit for giving Americans one thing they rarely get from Washington, a reason to believe the system can still protect the little guy.

The best is ahead,

Victaurs.