The State Circler

By: Anonymous

After serving for many years as Chief Information Officer for Prince George’s County (MD), WSSC Water, and Iron Bow Technologies, I took a leap of faith into entrepreneurship and founded Wave Welcome. Shortly thereafter, I launched a second company, PerVista AI. Both companies are proudly headquartered in Prince George’s County. Navigating the transition from executive leadership to business ownership required managing a wide range of variables with everything from operational costs and staffing to, most critically, securing loans to launch and scale successfully.

As a Black-owned business, I have also encountered the systemic barriers that make every step harder than it should be, including gaining access to the necessary funding for growing and scaling a business in an increasingly complex environment. It’s made me very cognizant of the efforts that lawmakers are undertaking that can make it easier for small businesses like mine to thrive. 

Unfortunately, not every idea proposed in Washington, DC is successful at strengthening the small business landscape. 

Take Senator Angela Alsobrooks (D-MD) and Bill Hagerty’s (R-TN) S.2999, the Main Street Depositor Protection Act, for instance. The bill proposes raising FDIC deposit insurance from $250,000 to $10 million for certain transaction accounts, predominantly those used by businesses.

The theory behind the increase is that it will help small businesses and strengthen depositors’ trust in community and regional banks, ensuring that during financial uncertainty, depositors won’t withdraw from these banks. The reality, however, is unlikely to match that. 

Instead, this bill injects moral hazard into our financial system, risks creating higher fees and a worse lending environment, and, in the case of bank failures, puts entrepreneurs like me on the hook for paying out multi-million-dollar corporate accounts. Even worse, the bill does nothing to create a more just financial system for minority-owned businesses. 

Black business owners already face systemic barriers to starting a business, accessing competitive loans, and competing in the marketplace. Only two percent of employer businesses are Black-owned, and Black-owned businesses are 3-5 times more likely to be labeled as a high credit risk––and not because we have more debt. What this means in practice is that it can be more difficult for entrepreneurs in our community to access much-needed capital.

Senator Alsobrooks and Hagerty’s legislation will only exacerbate this problem. 

When banks face higher deposit insurance premiums due to this massive expansion, they’ll pass the costs directly to customers through higher fees and stricter lending rules. Already facing barriers, Black borrowers will bear a disproportionate burden. We’ll face even tighter credit conditions in a market that already treats us as high-risk by default. 

Meanwhile, the ones who will benefit from this expansion are big businesses, which will have been given a $10 million government guarantee. With the proposed expansion, these depositors would no longer have an incentive to monitor how their banks manage their money and their financial condition. This will fuel moral hazard, where banks will make riskier investments in hopes of higher profits, knowing that if these investments fail, small businesses and hardworking families will bail them out. 

As a longtime supporter, I know that when Senator Alsobrooks introduced this bill, her intentions were good. But unfortunately, the impact of the bill is too severe for it to move forward. 

Like her, I believe that deposit insurance needs serious reform, but real reform must come with enhanced and comprehensive regulations. When Congress last expanded deposit insurance after the 2008 financial crisis, they also passed Dodd-Frank, which included regulations aimed at curbing moral hazard. The proposed legislation has none of these protections. 

Championing legislation that strengthens Main Street is a worthy cause, and when done correctly, it could protect depositors, address lending inequity, and support small business growth. But as it stands, the Main Street Depositor Protection Act is nothing more than a misnomer.

Vennard Wright is the Founder of Wave Welcome and CEO of PerVista AI, a weapon and threat detection firm headquartered in Greenbelt, MD.