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FDIC getting tough and its impact to the $250K insurance limit


This Kiplinger article reports on how the FDIC and other banking regulators are getting tough. One change mentioned is that the federal regulators are no longer "turning a blind eye to brokered deposits." I posted on this brokered deposit issue earlier this month. It wasn't mentioned in the article, but we're likely to see lower deposit rates from weak banks like what we're seeing at Ally Bank (today being another rate-cut Friday).

On a positive note for depositors, the article suggested that the temporary increase in FDIC coverage may eventually be made permanent:
The FDIC is trying to give banks some help. Look for Uncle Sam to make higher deposit insurance ceilings permanent when the temporary hike from $100,000 to $250,000 per depositor ends in 2013.

I doubt we'll see this become official anytime soon. On May 20th, the $250,000 deposit insurance limit was extended to December 31, 2013. This applies to both banks and credit unions.

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Marc Schoenfeld
Marc Schoenfeld   |     |   Comment #1
As much as I know it hurts us, I agree with the FDIC crackdown. As I've mentioned before, taking advantage of high CD rates like Wamu's 5% CDs just before their demise (which I did) is essentially like investing in a junk bond paying high interest rates without any risk to the investor. It just isn't what the FDIC was established for. So, I'm not surprised about this. It's one think to not worry about your bank going belly-up, but it's another to specifically target a bank you are pretty is likely to fail for the sole purpose of getting a great rate.
Anonymous   |     |   Comment #2
Pretty amazing that Ally Bank cannot seem to find the bottom on deposit rates.
Harold Fowler
Harold Fowler   |     |   Comment #3
Always looking out for the banks, never fails does it!

Anonymous   |     |   Comment #4
If more banks offered higher CD rates, who would buy U.S. Treasuries at their ridiculously low rates. The Feds are only looking out for themselves.
Mike   |     |   Comment #5
Corus bank is going bye bye very soon. This is a friendly warning to those people with greater than 250k in that bank. Bummer, maybe a "bye bye" to my great cd APY of 4.65%.