FDIC Chairman Sheila Bair has requested that Congress give her agency the authority to raise the $100,000 FDIC insurance limit to some unspecified amount, to be determined by Congress. In 2005, Congress voted to peg that $100,000 limit to inflation but that doesn’t kick in until 2011. Until then the limit stays at $100,000.
Will insurance premiums be raised? I’m not a banking expert or an insurance expert, but I know that if the protection limit is raised then there’s going to be greater pressure on the coffers of the FDIC if and when banks fail. The FDIC doesn’t need that, it’s under enough pressure. Unless premiums are increased, you’re putting a greater burden on the shoulder of taxpayers.
Who does this benefit? In all honesty, I think it benefits no one unless FDIC insurance coverage premiums are increased. With the very public failures of WaMu and Wachovia and IndyMac, the average person who reads the newspaper or watches the television is acutely aware of the FDIC limit and likely has been spurred to action. Fortunately for many of those who bank at those institutions, your money was protected even beyond the FDIC limits. (if you haven’t moved your funds around so that you’re under the $100k limit, what are you waiting for? Don’t be like this woman who lost $20k)
For the very wealthy, I assume they have financial advisers who handle all this complicated banking stuff and have them spread across as many banks as they need to be to stay underneath the limit. Raising the limit really doesn’t have an appreciable effect for the consumer (it might reduce the amount of paperwork as the rich will need fewer accounts!).
But then again, personal finance is more about psychology than it is about the math. If this move settles some people’s minds, then it’s a Good Thing.
FDIC asks to boost deposit limits [CNN Money]