The Trump Transition Team’s newly formed Department of Government Efficiency (DOGE) is looking for ways to cut government spending. Recently in the news, DOGE officials in President-Elect Donald Trump’s circle have talked about abolishing the FDIC. Reuters reported that such a plan would probably not gain congressional backing and would require a lot of heavy lifting. Still, the idea of eliminating the FDIC is raising some concerns. So, if the FDIC were abolished what would this mean for Americans? Here we will discuss the unintended implications of such a decision.
What is The FDIC?
The Federal Deposit Insurance Corporation was created during the Great Depression to restore trust in the banking industry. Its purpose is to supervise and examine financial institutions as well as resolve failed banks. When you deposit money into a bank you can do so with confidence thanks to FDIC insurance. Deposits are insured up to $250,000 even if a bank fails. The FDIC was pivotal in 2008 during the Great Financial Crisis, ensuring that there wasn’t another Great Depression. It also was essential earlier this year when several Silicon Valley banks failed.
The FDIC is an independent agency not funded by Congress. Instead, it operates on income derived by insurance premiums required by FDIC insured banks, and the interest on the required investment of the premiums in U.S. Government securities. It also can borrow money from the Treasury Department if needed.
What Are the Consequences?
Experts agree, that one of the most dangerous consequences of abolishing the FDIC is that it could cause a run on banks, similar to what happened during the Great Depression. While the banking industry does have a complicated framework of regulators, many agree that the FDIC is the gold standard.
What Can Americans Do?
If the FDIC were to be abolished, there are several actions that Americans can take to protect their money. While it isn’t wise to withdraw money from bank accounts, there are alternative options to consider to diversify your portfolio.
1. Invest in Gold
Gold is a very popular investment made by investors looking to diversify risks. Gold can be physically held in the form of coins or jewelry or indirectly through mutual funds, exchange-traded funds, gold derivatives, or gold-mining stocks. Of course, gold is still subject to market volatility as prices tend to fluctuate. One positive of investing in gold is that it offers a hedge against inflation. Traditionally, investing in gold didn’t garner high returns, but in recent years its value has seen a significant spike.
2. Open a Swiss Bank Account
It is possible to open a Swiss Bank Account from the US. There is strict scrutiny when verifying your identity, however. Minimum deposit amounts also vary by bank, but some are as low as $10,000. Swiss Bank Accounts are known for their low level of risk and increased privacy.
4. Invest in Money Market Funds
According to Investopedia, a money market fund is a kind of mutual fund that invests in highly liquid, near-term instruments. These can include cash, cash equivalent securities, or high-credit-rating, debt-based securities with a short-term maturity, such as U.S. Treasuries. Due to their high liquidity, they are very low-level risk and are insured by the Securities Investor Protection Corporation (SIPC) versus money market accounts which are FDIC insured.
Preparing for an FDIC Closure
Ultimately, it is unlikely that the FDIC will be closed. Even if this doesn’t become a reality, it is always a good idea to lower the risk of your investments and protect your money. In the long run these alternative options to a bank account will grow your money faster as well. How do you diversify your investments?
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Teri Monroe
Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.
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