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House Bill Seeks to Make Permanent the $250K Deposit Insurance Limit


House Financial Services Committee Chairman Barney Frank introduced legislation last week to amend the TARP provisions of the Emergency Economic Stabilization Act (the $700 billion bailout). In addition to strenthening accountability and closing loopholes, there's a provision that will make permanent the $250,000 deposit insurance coverage. Here's an excerpt of the committee's press release:
Makes permanent the increase in deposit insurance coverage for banks and credit unions to $250,000, which was enacted temporarily as part of the Emergency Economic Stabilization Act and is scheduled to sunset on December 31, 2009, and includes an inflation adjustment provision for future coverage.

According to this Bloomberg article the FDIC is reviewing this proposal and a few others directly related to the FDIC.

In my opinion the $100K limit was long overdue for a permanent increase, so I'm happy to see this proposal and I hope it passes. The US House has a Write Your Representative Service if you want to encourage your representative to support it.

To review the latest changes in the current FDIC and NCUA deposit insurance, refer to this post which includes links to updated FDIC and NCUA documentation.

Since I'm unable to post on all the latest banking related news, I'm keeping a list of links to the latest bank-related news stories at my daily news and deals post. So in addition to deals, if you come across an interesting banking news story, please leave a comment in that post, and I'll include it in the list.

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Anonymous   |     |   Comment #1
Gosh I hope that change goes through and becomes permanent. It would be a Godsend. Sure there are other ways now to increase ones insurance, e.g. via POD. But having the higher limit just makes it all so much less complicated.
Anonymous   |     |   Comment #2
I'll second that comment.
Anonymous   |     |   Comment #3
While I agree this reform is way overdue, let's not gush too soon. If the banks have to pay higher premiums to the FDIC, we customers ultimately will be stuck with the bill, i.e., even lower savings rates and higher fees!
Anonymous   |     |   Comment #4
The main reason for the increased insurance amount was to prevent depositors from making mass withdrawals from a bank. Why not set it to 1 million like some of the brokerage firm's insurance amount? Of course that would mean higher premiums that would have to paid by each bank. But that would mean that even millionaires would not need to worry about exceeding the deposit coverage limits. However, the potential payout in case of bank failures could be a staggering amount.
Anonymous   |     |   Comment #5
That would be the reason for the higher insurance premiums. However, I would be willing to accept a slightly lower interest rate for the convenience of not juggling accounts between several types of ownership and numerous banks and CUs. No stock market for me and it has really paid off this past year. Slow but steady positive returns with bank and CU laddered CDs.

Thanks tremendously to Banking Guy and this site.
Anonymous   |     |   Comment #6
This expansion of coverage is just another way to recapitalize the banking system via government spending. Premiums won't be raised enough to cover payouts; the FDIC "insurance" fund will certainly be bailed out.
Anonymous   |     |   Comment #7
And how will this be funded? FDIC is running out of money.