WASHINGTON — Former BB&T Chief Executive John Allison, a top candidate for the next Treasury secretary, reiterated Tuesday that policymakers should consider eliminating or reducing the deposit insurance level.
"We could reduce deposit insurance significantly. Ninety-five percent of consumers in this country have less than $50,000 in the bank," Allison said Tuesday during an interview on CNBC.
The longtime banker said he favors scrapping deposit insurance altogether, but acknowledged that would be politically difficult. However, his remarks indicate that if he is tapped and confirmed as Treasury secretary, he might pursue reducing the insurance level.
"I am a banker, I like having a lot of deposits, but it is not good economically or fair to people to incent everybody to have their money in the bank," Allison said. "You want to incent them to buy some stocks and bonds."
Allison has made such arguments before, but they are getting new attention given his possible new role.
The deposit insurance level was raised to $250,000 for all accounts during the financial crisis as a way to increase confidence and liquidity in the banking system. The temporary increase was eventually made permanent by the Dodd-Frank Act of 2010.
Although that law was opposed by all but a few Republicans, higher deposit insurance levels is generally a bipartisan position. It remains to be seen whether Allison would be willing to take on that fight if he becomes Treasury secretary. If so, he would be battling community bankers, who fought for years to raise the level from its 1980 setting of $100,000 per account.
During the interview, Allison was asked whether reducing deposit insurance would be a good idea politically because millennials who have witnessed the financial crisis have proven to be risk-averse and wary to make significant investments such as home purchases.
"I don't think many millennials have that much money in the bank," said Allison, who added that most millennials would still have all of their deposits insured.
Allison has also been outspoken about returning to the gold standard, but that, he said during the interview, is mostly a theoretical concept.
"The reality is that when we had a gold standard it worked extremely well, but it was an international standard, and how we get back to an international commodity-based standard I am not sure," he said.
"I don't think we are going to a gold standard, but I do you think you have to discipline central banks, which is why I think you need some kind of rule that controls the money supply, which is different than how much debt the government chooses to take on," he said.
When asked whether he would take the Treasury secretary job if asked by Trump, Allison said, "I would certainly consider it, but I would have to reflect on it."