Newest Version of Bailout Bill May Raise FDIC Insurance Limits to $250,000

Newest Version of Bailout Bill May Raise FDIC Insurance Limits to $250,000

The version of the bailout bill that the Senate is scheduled to vote on tomorrow raises the FDIC insurance limit from $100,000 to $250,000 for one year.

To try and attract more mainstream support tfor the bailout bill, legislators have added language that raises the FDIC insurance limit from $100,000 to $250,000.  For BestCashCow readers, this is good news. 

The FDIC limit has not been raised in two decades and after inflation, consumers receive far less protection today on their deposits than in the 1980s.  The raise will make it easier to deposit larger sums in fewer banks and hopefully increase confidence that the money will not be lost.  The hope is that this increased confidence will eliminate or at least reduce the kinds of bank runs that brought down Indymac, WaMu, and Wachovia.  It will also reassure banks that their deposit bases are stable so that they can begin lending again.

While the legislation is only supposed to raise the limit for 1 year, I think once it's been increased, it will be exceedingly diffifult to reduce coverage levels.  

Is this a good idea?  For most of us who are looking for the best rate, yes.  But if I look at it less selfishly, I do think there are problems.  It rewards banks who are not as well-managed and punishes the stronger ones.  It also increases the potential liability of the FDIC.  Today, $45 billion in FDIC funds protects $4.5 trillion in deposits.  This multiplier will only increase under the new plan.

Still, at a time where there really aren't any great alternatives, at least this proposal helps the savers of the world.  And that's a good thing.

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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Comments

  • tightwad

    October 02, 2008

    Sounds like it may only be temporary for one year.What happens after one year when everyone rushes to pull their > 100,000?

  • thedorightman

    October 04, 2008

    so...what accounting firm was named to audit the process?

  • Sam Cass

    October 04, 2008

    Probably the same one that audited Enron, AIG, WaMu, Merrill, Lehman, and Bear Stearns.

  • thedorightman

    October 05, 2008

    First my country starts to become unrecognizable due to the massive flooding of illegal aliens, and now the money is gone....does anyone else feel deeply depressed about this?.

  • wheresthemoney

    October 06, 2008

    it's easy to be depressed. but part of me thinks this is the first step to recovery. first you have to bottom out.

  • stephen harrris

    October 07, 2008

    to raise to $250,000.00 fdic may close small banks. example. obama has so much for his run for the president, that he has 80 banks because of $100,000.00 fdic. but if raised to $250,000.00 he only needs 40 banks.

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