Dedicated to Deposits: Deals, Data, and Discussion

Proposed FDIC Coverage Increase May Only Be Temporary

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The Senate is scheduled to vote on a new version of the bailout bill today that is likely to include a provision that will raise the basic FDIC coverage from $100,000 to $250,000. However, this change may not be permanent. Senator Christopher Dodd, chairman of the Senate Banking Committee, was quoted by this WSJ article as saying that they "would vote on raising the FDIC limit to $250,000 from $100,000 for one year."

So if this bill does pass with the one-year timeframe, you may not want to go over $100K at a bank with long-term CDs. At least it would allow those with over $100K to make greater use of savings account and short-term CD specials.

Regarding coverage limits of credit unions, that's governed by the National Credit Union Administration (NCUA). The NCUA just issued this press release stating support for the insurance coverage increase. The chairman was quoted as saying:
I cannot overstate how important it is that the protections offered by our two insurance funds remain parallel.

So if the FDIC limits change, it appears likely that we'll see the same change in the NCUA limits.

I don't see any mention at the NCUA website regarding the recent new interim rule issued by the FDIC on Friday (see post). This new rule eliminated the concept of qualifying beneficiaries that were required for extending insurance limits on POD accounts.

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Comments
20 comments.
Comment #1 by tuphat (anonymous) posted on
tuphat
The text of the bill is clear: increase to $250k is only through 12/31/2009. Applies to both FDIC and NCUA. See act section 136.

http://banking.senate.gov/public/_files/latestversionAYO08C32_xml.pdf

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Comment #2 by Anonymous posted on
Anonymous
Better than nothing, but why oh why do they ALWAYS pass these short term bills? It is just like HSBC with their short term interest bonus.

I think there will be a flood of new money into the 3.5 - 4.0% savings accounts out of the lower paying ones (<3.5%).

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Comment #3 by tuphat (anonymous) posted on
tuphat
One theory is that despite temporary nature of this provision, it will become the new norm, i.e., Congress will almost have to extend or make permanent.

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Comment #4 by Anonymous posted on
Anonymous
I'm surprised WaMu/Chase is still offering the 4% online savings and 5% online CDs.

You'd think Chase would've lowered the rate by now. Guess they really want to keep the deposits...

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Comment #5 by Anonymous posted on
Anonymous
If only they'd temporarily eliminate the tax on savings interest we'd be in fat city!

Why does extending the tax breaks on solar panels make the bail out more attractive to republicans?

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Comment #6 by Anonymous posted on
Anonymous
Limiting the FDIC insurance increase to ONE YEAR is PATHETIC.

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Comment #7 by O-Qua Tangin Wann (anonymous) posted on
O-Qua Tangin Wann
Anyone else agree that politicians are sometimes just plain stupid?

Our only hope is that they increase it for the year, and when the year is up, they vote to extend the increased coverage.

Banks might push for the extension at that time for fear there might be a run as depositors race to decrease their balance to equal the lower coverage amount.

~O-Qua Tangin Wann

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Comment #8 by Anonymous posted on
Anonymous
It is expected they would have to extend the increase since it would be political suicide not too, but I certainly would not take out a long term CD just hoping that they will extend it.
It will help the savings accounts and the short term CD's, but not the 3-5 year CD's with the high (relatively) rates.

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Comment #9 by Anonymous posted on
Anonymous
Wow...

Just in time for all those IndyMac folks who lost their ****(ets) in that Bank's failure....

Genius move.... In other words, if those people had 250k of FDIC protection, fewer of them would have lost their money... That's gotta leave them pretty ****ed off...

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Comment #10 by trinidon2k (anonymous) posted on
trinidon2k
I agree with Qua Tangin Wann.

If it's ONLY for a year, there is definitely going to be a run on deposits +100k.

Anyone who is smart enough to take advantage of the increase will be smart enough to pull out before the expiration of the limit.

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Comment #11 by Anonymous posted on
Anonymous
Thank you, Banking Guy. The time limit on this is such a kick in the head. I didn't see it coming. It seemed so obvious to me that after twenty-eight years they needed to do something. These politicians, and especially the worthless fat blowhards like Dodd, are just so out of touch with the people they claim to represent. I appreciate your news, Banking Guy, but it leaves me really disappointed. I probably will not live long enough to see the reform in all these antique FDIC/NCUA rules that is so long overdue.

And as other posters already have mentioned, one cannot go forward based on only the hope that these rules will be extended at the end of next year. Actually, for safety you must assume these changes will NOT be extended, and plan accordingly. This is all but worthless, and more annoyance than help.

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Comment #12 by Anonymous posted on
Anonymous
"Better than nothing, but why oh why do they ALWAYS pass these short term bills? It is just like HSBC with their short term interest bonus."

Hey, HSBCDirect's short term promo is better than ING never-promos. ING doesn't bother raising its Savings Interest rate, despite having perhaps a half a dozen "branch cafes", which happen to be in their own office buildings with the workers upstairs. This is compared to HSBC which has a ton of global branches and has to manage their own ATM network too. And HSBC is beating them by .25 on the APY for savings.

ING simply waits for rates to come back down and then says, "oh look, we're competitive".... What a joke.

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Comment #13 by chris (anonymous) posted on
chris
Hi there,

I tried contacting you a while ago but never received a response, can you please email me at chris.hamilton @ boomerang.com.au so we can discuss my proposal?

Thanks

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Comment #14 by Sheila (anonymous) posted on
Sheila
Chris,

I told you a thousand times NO! I reject your wedding proposal. I will not marry you. I will never marry you.

Stop following me through these blogs.

Go away.

Sheila

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Comment #15 by Anonymous posted on
Anonymous
Chris, you two-timing ****!

Who is this SHEILA?!?!?

That's it! You and I are through! And you can forget about me helping you with that transfer of funds from Nigeria, too, mister!

- Diane

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Comment #16 by Sheila (anonymous) posted on
Sheila
Diane, it is me, Sheila.

I did not know about you either.

I am sorry he hurt you too.

I can only hope that Chris will suffer castration so he can no longer hurt any other women in the future.

Thank God you didn't help Chris with the Nigerian funds transfer. If you had, he would have moved on to selling phony securities backed by the Vatican.

With so many bad men like Chris out there, I am beginning to see the appeal of women marrying women. (I am so jealous of Ellen Degeneres and Portia Degeneres.)

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Comment #17 by Thomas (anonymous) posted on
Thomas
The bill only increases it to 12/31/2009 because exisitng law requires teh FDIC and NCUA to adjust he insurance limit based on an inflationary index from the tiem it was last increased to $100,000. We'll know what the new limit will be in late 2009, but it won;t be dropped back to $100,000

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Comment #18 by Thomas' Editor (working pro bono) (anonymous) posted on
Thomas' Editor (working pro bono)
The bill only increases it to $250,000 through 12/31/2009 because existing law requires the FDIC and NCUA to adjust the insurance limit based on an inflationary index from the time it was last increased from $40,000 to $100,000. We'll know what the new limit will be in late 2009, but it won't be dropped back to $100,000.

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Comment #19 by Sofa King Frustrated (anonymous) posted on
Sofa King Frustrated
Thank you to Thomas' editor, as Thomas had a whopping 5 typos in his post.

The above notwithstanding, I hope what Thomas said is accurate about the fact that the FDIC and/or NCUA will not drop the limit back down to $100,000 after 12/31/09.

My guess is that once the limit is raised, it won't drop lower. But you never know what our crazy and mismanaged government will do.

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Comment #20 by Anonymous posted on
Anonymous
It is my understanding that minutes ago the house passed the same bill that the senate had already passed earlier this week.

FDIC would increase coverage to 250,000 from 100,000 till 12/31/2009 per this article:
http://www.wane.com/Global/story.asp?S=9113611&nav=menu32_2

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