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Extension of FDIC's $250,000 Deposit Insurance Limit Is Almost Law


Update: On Wednesday afternoon, the President signed this bill into law. The extension of the $250K coverage to 12/31/2013 is now official.

On Tuesday both the House and the Senate passed an amended version of Bill S.896 which includes a provision to extend the temporary increase in deposit insurance from December 31, 2009 to December 31, 2013. This applies to both FDIC and NCUA. You may not hear much about this provision in the media since it's just a tiny part of the bill which primarily deals with mortgage foreclosure prevention and enhancement in mortgage credit availability. The bill passed easily in both the House and Senate, so it appears very likely that it should soon be signed by the President and become law. More information on this bill is available at the Thomas Database page.

This news article also has a good summary of this bill including the deposit insurance provision. In addition to the deposit insurance, the bill also would increase the borrowing authority of both the FDIC and NCUA. This gives the agencies more time to rebuild deposit-insurance funds and provide more flexibility in setting assessments. There's also a provision that should make it easier on the credit unions as the NCUA deals with the losses related to the corporate credit unions.

For the deposit insurance, it's not the permanent increase that many had wanted, but at least it adds another 4 years to the current $250,000 basic coverage. Unfortunately, new 5-year CDs will go into 2014 which will extend past the temporary increase. It's quite possible that it could be extended again, but no one knows for sure.

Once it becomes law, the FDIC and NCUA should provide the official details. It should be basically the same as we have now except that the higher coverage limit won't end until 12/31/2013. So with $250K as the basic coverage limit, joint accounts will be covered up to $500K. Also, extra coverage can still be available through revocable trusts.

The insurance limit change started in late September and early October 2008 after the first bailout bill failed to pass the House. A new version of the bill was written, and it included a temporary increase to the basic FDIC and NCUA deposit insurance from $100,000 to $250,000. This revised bailout bill passed Congress and was signed by President Bush on October 3, 2008. The deposit increase was scheduled to end on December 31, 2009.

Before this $250K coverage took effect, it was possible to extend insurance coverage way above $100K through revocable trust accounts. However, it's not as straightforward as staying under the basic limit. There's always the worry that a FDIC claims agent will find something wrong with how the revocable trusts are done which would reduce the coverage. When you're under the basic limit (currently $250K), there's much less doubt. To review some of these issues, refer to my post on extending FDIC/NCUA coverage.

To review the latest FDIC and NCUA rules for deposit insurance, please refer to my FDIC and NCUA deposit insurance post.

Thanks to the reader who mentioned this news in the Daily Deals & News Post.

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Anonymous   |     |   Comment #1
Thank you, Banking Guy, for posting this crucial, pivotal news.

I am bitterly disappointed and just plain ****ed off. I can't write here what's on my mind, not using the words I would prefer. It would be pulled.

Suffice it to say Congress sucks. This asinine decision only postpones our problems. And only God knows what Congress will do so many years from now. The 100K limit is a joke today, a vestigial, given inflation. Yet with this law it remains in place, only just delayed. I would love to know what constituency, what political forces, acted to kill the permanent $250K limit. If I knew, I would do anything possible to move against the other side. But with the way things are today, with everything being done in secret, you can't even find out who is the enemy.

I am livid, and I agree totally with Banking Guy's take on the dangers for us going the ITF or the POD route. That could be a path to financial disaster. We are so totally ****ed, and we don't even get to know who or what is responsible.
Anonymous   |     |   Comment #2
Filthy Congressional scum. Replace 'em all!!
Anonymous   |     |   Comment #3
Yesterday they increased costs for people who use their credit cards prudently. Now this! Congress is fighting a war against decent, responsible Americans in order to subsidize and bail out irresponsible jackasses. And they are winning that war. The inmates have taken over the asylum. And they are almost certain to burn it down.
Anonymous   |     |   Comment #4
There is bigger and hidden addendum behind secret congress meetings, it remains to be seen at a future day.

I, for one, don't believe or trust anyone currently in the Congress or white house.
David   |     |   Comment #5
The "sunset provision" in this extension allows the FDIC to set aside less funding in their long term budgeting. It's clearly and accounting gimmick, but not a unique one. The Bush administration used the same techniques to claim that their tax cuts would have minimal impact on deficits. That's why the estate and gift tax rate, as currently written, goes from 0% in 2010 to 50% in 2011.
Anonymous   |     |   Comment #6
The estate tax "elimination" gimmick is a good example of how accounting budgets are manipulated just to suit a specific time interval.

I wonder what would happen if they revert the FDIC limit back to $40,000 before it was changed to $100,000 later? This all goes to show that their are no guarantees in life, retirement, money, or job security. If you rely on the government to "take care of you for your entire life", you are really pushing it.
Anonymous   |     |   Comment #7
Speaking of gimmicks, look what FEDs are doing to the Dollar and thus our savings, destroying it from inside out by printing money to cover the ambitions of the politicians with their pork barrel project that never finishes. What are they trying to prove, that they care for their constituency or personal advancement for the next election?
Anonymous   |     |   Comment #8
I think people running for office have it this order:
1) Get elected
2) Satisfy your constituency

If you can't get elected, then you won't go anywhere.
Anonymous   |     |   Comment #9
RIP Milton...They know not what they do ...
Anonymous   |     |   Comment #10
My question is:

Why do we still elect the same politicians over and over again?
Anonymous   |     |   Comment #11
My thinking is that we elect the same slimy politicians because of people ignorance and short term memories.
If we do a little research before voting, there will be no incombatants ever re-elected.
Something to think about for the next election.
Anonymous   |     |   Comment #12
The level of paranoia here is simply amazing.
Anonymous   |     |   Comment #13
To the poster of:
"The level of paranoia here is simply amazing", you must be one of those ignorant voters.
Anonymous   |     |   Comment #14
Agree w/ above. Not a Bush supporter at all (in fact I despise politics) but the direction this country is traveling in now is frightening. If you work, pay bills, act responsible, you get totally ****ed from every direction now. Health care likely next. OMG, even Octomom pulled off her crazy crap.
Fred   |     |   Comment #15
Looks like Capital One and Zions lowered their savings rates.
Anonymous   |     |   Comment #16
Bill was signed by the president this afternoon, so the FDIC extension is now official.
Anonymous   |     |   Comment #17
I'm more interested in figuring out how they're going to pipe some of that $500B in FDIC "emergency" money into the pockets of Goldman and other international bankers.
Anonymous   |     |   Comment #18
Where can i find the news of the bill been signed by the President? I did a search online but didn't find it.