The FDIC guarantees most bank deposits up to $250,000 so that, if an insured bank fails, depositors don’t have to worry. Their money is safe. Today, we assess some alarming developments to figure out why the head of the FDIC is so worried…
By Peter Reagan
Modern banking is somewhat of an anomaly in human history. The idea of having an organization hold onto your money for you, so that they can lend it out and collect profits on your money? And somehow, still be able to return your money the moment you want it back?
When we put it that way, the very idea sounds absurd. That’s why I once wrote, Banks Need Your Trust Because They Don’t Have Your Money.
There are quite a few Americans (not to mention people worldwide) who don’t even have bank accounts, and often they don’t because they don’t trust banks… Considering the history of the U.S. financial system over the last century, can you blame them?
Still, most Americans rely on their bank accounts for collecting income and sending payments. That’s where the Federal Deposit Insurance Corporation (FDIC) comes in. The FDIC was created during the Great Depression to make Americans feel secure about their bank.
(Which should make people wonder why the Federal government thought it necessary to encourage people to go back to using banks after one-third of them failed…)
So, what does the FDIC do?
The job of the FDIC is generally considered to be to give Americans security that their deposits in banks won’t disappear if the banks fail.
It does this by providing oversight to the banking industry and providing guarantees for bank deposits up to $250,000.
Sounds nice, doesn’t it?
And for the sake of discussion today, we’ll just assume that their bank oversight is successful and that the FDIC actually helps to keep banks solvent and sound.
(Some of you are laughing while reading that last sentence, I know. I did say “for the sake of discussion today,” though.)
Even if it is true that the oversight of banks has been successful, there is a coming problem with the FDIC system. Courtenay Brown with Axios writes:
The inspector general says that as of February [2025], nearly 17% of remaining staff are eligible for retirement this year.
It takes three years of training for new commissioners to be qualified to lead bank examinations.
So, the FDIC was already facing staffing problems.
And, now, DOGE has come through, and staff has decreased even further. Again, from Brown:
The FDIC reduced staffing by 9% to less than 5,950 workers since January.
Additionally, about 450 employees — or 7% of all FDIC employees — accepted the administration’s “deferred resignation” offer.
Sure, those numbers sound scary…
But does it really matter?
I get that sentiment. I feel that way when I hear a lot of statistics thrown around without any context to tell me why they actually matter. So, here’s the answer:
“With fewer examiners but the same responsibility to conduct statutorily required exams in 2025, it may be difficult for the FDIC to complete these examinations by the end of the year,” the inspector general said in a new report.
Fewer bank examiners means less bank oversight. Meaning that fewer FDIC employees could mean that banks won’t be as closely monitored to make sure that they don’t make foolish decisions which are more likely to lead to a bank failure.
I’m not here to argue about the pros and cons of regulatory red tape. I’ve seen estimates that anywhere from 3% to 15% of banks’ revenue goes toward regulatory compliance. It’s no secret that banks themselves would doubtless be delighted by fewer bank examiners and less regulation. Bank CEOs think that the whole purpose of regulation is to limit their profitability… And in a sense, they’re correct. Regulations and examiners are supposed to prevent banks from taking excessive risks.
On the other hand, even with the FDIC in place, we’ve seen dozens of bank failures over the years and you probably remember the huge bank bailouts of the mid-2000s when banks were deemed “too big to fail.” Which is just a polite way to say that taxpayers like you and me will pay for bad bank decisions.
Even with the best, most honest and stringent bank oversight, they still go under at a disturbing rate.
Which leads some people to say that they don’t want to deal with banks at all.
Is that practical in this day and age? Not for most people (drug dealers and car thieves don’t use bank accounts, but that hardly qualifies their line of work as particularly smart or safe).
In our current world, we use services such as debit and credit cards facilitated by banks to do our shopping, pay our bills and run our businesses. Even if you’re using a debit card or writing checks, you need a bank to process the funds transfers for those transactions.
Banks are a necessary evil if you want to transact in meaningful amounts. This isn’t Argentina, where a home buyer is expected to show up with a suitcase full of cash. Here in the U.S. even having a suitcase full of cash is a bad idea, thanks to civil asset forfeiture. (Read just a few of the stories at that link and you’ll feel your blood boil…)
In fact, the more you learn about banks and how they work, the less likely you are to want to rely on these historically unstable institutions…
How do we mitigate the problems of the banking system while still getting the benefits?
That’s a smart question to ask, and the answer is to not depend on the banking system. At least, not completely.
If all of your purchasing power, your stores of wealth, are kept in bank computers as numbers on an electronic ledger, then, you’re at the mercy of the bank’s IT department.
And if the bank falters, that can cause huge problems for you. After all, the FDIC coverage only insures certain amounts. And not for everyone.
So, where should you look to keep your stores of purchasing power safe?
To answer that question, we go to our good friend Ron Paul who writes,
Ronald Reagan once told me that no nation has abandoned gold and remained great.
Reagan was absolutely right about that, and while he was talking about nations, the same idea also applies to individuals and families.
To keep your financial house strong and solid, you need to have stores of wealth that are inflation-resistant the way that gold is, whose price adjusts with inflation so that its purchasing power remains relatively constant no matter what happens in the broader economy.
Now, Reagan specifically mentioned gold, and that is a great choice, but there are other options, too, that you can diversify into to ensure that you have a solid foundation for your savings. A sturdy base from which you can grow and expand your nest egg.
Other excellent options include precious metals such as silver, platinum, and palladium, all of which are commodities. And commodities have a history of resisting the corrosive purchasing power destruction of inflation that nearly every other financial asset suffers from.
So should you clean out your bank account and buy gold? No, not unless you’re prepared to return to a barter economy. While such a dramatic move might be a good idea in a few limited cases, for the vast majority of Birch Gold customers, it’s a bad idea. Should you diversify your savings, especially your long-term retirement savings, with tangible, inflation-resistant assets that are more than just digital entries on a bank’s spreadsheet? That’s a personal decision, one each of us must make for themselves. I strongly encourage you to learn more so you can make an informed decision that’s right for you.
If you want to understand why precious metals retain their value (if not rise in price) when currencies are devalued by inflation, start with reading up on the benefits of physical gold ownership. Learn more about the benefits of silver ownership here. Finally, our free 2025 Precious Metals Information Kit is a great resource that collects and presents all the need-to-know information you need in a single, convenient source.
Whether or not you decide that diversifying with physical precious metals is right for you, you owe it to yourself (and your family, and your descendants) to make an educated and informed decision. Just don’t make one that you’ll regret.