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Permanent Increase in Deposit Insurance Limit Didn't Make It Into Financial Reform Bill


It looks like we'll have to wait some more for the $250K coverage limit to be made permanent. According to the CUNA News Now

A permanent increase in the deposit insurance limit is likely on the backburner, said American Banker (May 26). Some lawmakers hoped to address the limit--temporarily at $250,000 per account until 2013--in the regulatory reform bill the Senate passed May 20. [...] Sen. Ben Cardin (D-Md.) had introduced an amendment in the regulatory reform bill to make the increase permanent, but it failed. Some observers say the increase will be added by those working on the House and Senate reform bills.

It would be interesting to know why it failed and who didn't back it. Was it just due to the fact that there are several years before the temporary increase ends? Or are some politicians against making it permanent? As many readers have mentioned, even though it won't end for over 3.5 years, it does affect depositors today who are deciding about how much to put into long-term CDs.

Unfortunately, the legislation database at thomas.loc.gov didn't have any info on this (at least not any I could find).

This amendment to make the $250K coverage limit permanent was first mentioned in an AP article a couple of weeks ago. I reported on it in this May 16th blog post.

Just over a year ago the President signed into law the deposit insurance change which extended the $250K standard coverage limit to December 31, 2013. According to the FDIC:

On January 1, 2014, the standard coverage limit will return to $100,000 for all deposit categories except Certain Retirement Accounts (includes IRAs), which will continue to be insured up to $250,000 per owner.

Hat tip to the reader Cactus who mentioned this CUNA news story in the Open Discussion Thread.

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Gaelicwench   |     |   Comment #1
Interesting.....Needless to say, it's just one more reason to truly believe that they are making it very difficult for many of us to save.

Call me cycnical, but that's how I see it.
Jo/Gaelicwench   |     |   Comment #3
That would be MOI, Saints.....I'll be sure to correct that, eh.....

Have a safe and wunnerful Memorial Day weekend. And by all means, be sure to spend over the $100k that won't be protected via FDIC.

Anonymous   |     |   Comment #6
FDIC coverage is similar to how auto insurance works.  Auto claims will be paid depending on how much each car is insured for and by how much monay that the insurance company will get from the premium money.  Likewise, FDIC has to collect premiums from the banks and pay out claims when banks fail. So if you want your car (and liability suits) to be covered for a million dollars, you have to fork over higher premium costs from the customers.  So go tell the FDIC to bill the banks a much higher premium for insurance coverage.  If the banks don't like that, they have a couple of choices - look for alternate insurance (remember the state insurance coverage that used to exist back in the 1970s?) or go about doing business without insurance (such as drivers driving in states where insurance is an option).
Anonymous   |     |   Comment #7
This is annoying and disappointing without question.  But at the bottom line all it means is we might in future be forced to name more beneficiaries than we would like to name.  Having to do that, should it happen, will be an unwanted and unwelcome burden for me.  But if need be, if I am forced, I will name the additional beneficiaries and go from there.

I don't have an unlimited supply of possible beneficiaries.  So for me this might mean spreading my nest egg over more banks.  I hope the interest penalty I (most likely) will incur is not too big.
Anonymous   |     |   Comment #8
What about where you don't have beneficiaries? Say you are single with very few close relatives.  That woud not be option for registering accounts.  I guess you can open trust accounts, but that will incur legal fees.
Anonymous   |     |   Comment #9
It becomes very ticklish if you are short beneficiaries. This is especially true when they are worth only 100K each.

You can look into naming organizations as beneficiaries.  Examples would be church, hospital, high school scholarship fund, charities,  . . . many more.  I think the rule is they must be "not for profit".  I have not named organizations so far, only because I am really uncertain about the rules and I don't want to end up in trouble.  It's easier (or at least I feel much more secure) to name people. 
Anonymous   |     |   Comment #10

And don't forget if a POD beneficiary dies you *immediately* loose the associated deposit coverage.   There's no grace period for account restructuring as there is for joint accounts.  So, unless you've another beneficiary you can substitute (and the bank will agree to the mod without closing the account) you'll likely have to eat the early withdrawal penalty to move funds.  Does lightning ever strike?  Yes!  Been there, done that!!