FDIC Asks Congress to Increase Bank Deposit Insurance

The Federal Deposit Insurance Corp. wants Congress to increase temporarily the $100,000 ceiling on bank deposits guaranteed by the government.

The move is designed to ease pressure on banks after two of the country's largest institutions were forced from business in the last week as customers started to withdraw money from their accounts.

"Unfortunately, there is an increasing crisis of confidence that is feeding unnecessary fear in the marketplace," FDIC Chairman Sheila Bair said in a statement. "To address this crisis of confidence, I do believe that it would be helpful for the FDIC to have the temporary ability to raise deposit insurance limits."

While the FDIC has not said what the new ceiling should be, Sens. John McCain (R-Ariz.) and Barack Obama (D-Ill.) have both expressed support for a ceiling of $250,000, backing a proposal currently being molded by Congress.

Any increase in the ceiling would require an expansion of the FDIC's insurance fund. The fund is replenished by an assessment on the banking industry, not taxpayers, but higher assessments would limit the amount of money banks have available to make loans.

--Binyamin Appelbaum

September 30, 2008; 3:42 PM ET  | Category:  business
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NO BAILOUT NEEDED!! WHY ? BECAUSE THEY HAVE THIS/ 3,00000000000000000000000000000000









THAT IS 3,000000000000000000000000000000000000000000 TRILLION SITTING DOING NOTHING….




Posted by: DAVID,VETERAN | September 30, 2008 3:53 PM

The FDIC may require more reserves from banks, but if the Fed decreases rates then it will be easier for banks to borrow to meet the requirement.

The country isn't unilaterally invading another nation unsuccessfully, so there is no need to hand out money as there was from to 2003 to the surge.

You all don't study civics in journalism school, do you?

Posted by: Kacoo | September 30, 2008 4:05 PM

The value of the FDIC insurance today is only about a quarter to half of its value when the FDIC was set up. Raising it to $500,000 is the only honest way to go. It would just reestablish the scheme to the value it had during the "first" depression...today's depression is only pending.

Posted by: George11 | September 30, 2008 4:06 PM

Knew this would happen. Kinda stupid rule to begin with. Just forces rich people to spread amounts over many banks so in long run banks have the same amount of money insured. It does cause short term havoc with bank and big depositors move their money around until they pick up investors from other banks doing the same thing.

Posted by: Arny | September 30, 2008 4:09 PM


As I recall the saving rate in this country is -0-.

Unless, one's been part of this current legal bank robbery most honest people ain't got no dough noways

Oh well, I just might find a loose bag of hundreds weighing 25 pounds or so one day and need a safe place to put it.

Posted by: jatox | September 30, 2008 4:11 PM

250000 sounds ok. Just please, McCain, stop "helping" in Washington. Any more "help" from McCain and my 401k won't be worth anything.

Posted by: Gruddy J | September 30, 2008 4:22 PM

Thank God, the $517 I have in my savings account will be okay.

Posted by: BlueDotRedSea | September 30, 2008 4:34 PM

More bailing out the rich crap.

What about those of us that don't have $100K+???

What is Congress going to do for the working man? Nothing. Never does.

Posted by: Angry Dem | September 30, 2008 4:36 PM

I just realized today

That anyone with over 100k in a bank, will be withdrawing it.

This will create silent runs on deposits.

The FDIC needs this increase, or it will face many foreclosed banks from silent runs on deposits.

Indymac died from a silent run on deposits.

Washington Mutual - well -let's just say - over 16 billion from deposit accounts was withdrawn since September this year, THAT is why they closed shop.

With no credit ?

And LIBOR reaching 6.8 % today ? up from 2? That means banks won't lend under 7% to each other, consider that 10% to you.

So, Banks will rely on deposits, and you know what ? If people pull their deposit accounts fearing that 100k coverage isn't enough for their 230k ?

Yeah, you guessed it

One headline after another of failed banks.

Posted by: JustRealized | September 30, 2008 4:39 PM

"Angry Dem" are you kidding me?

Do you even know what the FDIC is? Pick up a book before you open your mouth again, you sound like a fool.

Posted by: Hahaha | September 30, 2008 4:42 PM

Yeah because its all McCain's fault isn't it. Wake up and open your eyes. It's all politicians fault both sides of the isle. The Dem's and Rep's are all back stage rehearsing together before stepping out on the main stage to preform in front of you and I.

Posted by: Adam | September 30, 2008 4:44 PM

Props To David.. You know whats going on man. I have total sympathy for the first comment on this page...

Posted by: Ken Hammond | September 30, 2008 4:45 PM

How long has 100k been enough? I personally don't know anyone that has over 250K in a bank account. I don't think we need any more credit either, I get 5 offers a day for more credit. Maybe this decrease my junk mail! Paulson reportedly has over 700 million in personal assets and was the CEO of Goldman Sachs. Let Paulson give up the first 700 million dollars. Then take all the assets of the banks CEO's to pay the rest.

Posted by: Abe | September 30, 2008 4:46 PM

Angry Dem Wrote: What is Congress going to do for the working man?
If you keep spewing such crap, Congress will be forced to lay you off.

Posted by: RossAnderson | September 30, 2008 4:47 PM

"More bailing out the rich crap.

What about those of us that don't have $100K+???"

Uh, AngryDem, those of us who have under $100K are steadily insured. The insurance LIMIT is $100K. Your and my $4.39 is insured 100

Posted by: SarahEHR | September 30, 2008 4:47 PM

So, up the FDIC insurance and make people save more to put more down and take less for the loan. Save-people-save, why should I bail out someone who wanted what they couldn't afford, and now can't keep up! save-people-save. save more, borrow less, we'll all be the better for it.

Posted by: JSW | September 30, 2008 4:47 PM

The Govt cant even cover $5 if everyone makes a run on the bank. Want change....make the run pull what you do have since you get Zero intrest anyway and create a real revolution...maybe finally wake up some people. A BAILOUT will only prolong the issue. Let it fail and lets move foward.

Posted by: Thomas Jefferson | September 30, 2008 4:48 PM

I'm pretty sure today ?

record withdrawls

Hey, if YOU had over 100k in an account in a bank ? and saw Wall Street YESTERDAY ?

not a single person would disagree with you for going to the bank today to take it out.

BUT - with no credit ? and 7 % LIBOR from 2 % ? Overnight last night ?

Banks will now loan at 6.8% NOT 2% - to each other. That means their slide to reach profit ? will be > 7 to you. Try 10.

Second - no credit ? Banks DESPERATELY - need their deposit money/accounts.

And you can bet today there were record withdrawals - WHO in their right mind would let over 100k sit in the bank after Monday.

Yeah - and THAT spells silent run on deposits.

My FIRST though reading this headline way - what ? FDIC only HAS 50+ Billion to help, why would they want to pay MORE.

Then it hit me, oh, yeah, if people don't think their money is safe ? they'll take it out, and that in and of itself will collapse the bank.

We saw it with IndyMac - Nations 3rd largest bank, and Washington Mutual, 4th largest bank.

Wake up - and do take your money out if you have over 100k, FDIC isn't doing this because they want to, they are doing it because they have to.

If they don't we'll see FDIC's 117 cross hair list catapult.

Posted by: TodaysOngoings | September 30, 2008 4:48 PM

the amount of ignorant comments on here is scary...in case any of you wonder why we have a bunch of idiots running the country, its because we have a bunch of idiots electing them.

if you don't know anything about finance do yourself a favor and pick up a book.

Posted by: Anonymous | September 30, 2008 4:48 PM

Raising the FDIC cap is exactly what needs to happen. People who are uncomfortable in putting money in the market, put it in a bank. And for those of you out there that think that 100k is a lot, it is. But some of us save our money, work long hours and eventually reach that point.

I have predicted this was coming for quite some time (years).

The economy could not keep expanding as it was. Look at the number of homes being built, there were not that many people being added to the population in my area to make sense of the number of new homes going up. So what happens, you lower the standards for a loan. I can not imagine what people were thinking when they thought they could afford some of these morgates.

Those of us that have saved for scenerios like this, should not loose their life's savings overnight.

Our money needs to be in banks to keep the economy going, not under your mattress. Or we all should just pull out our money and head to Vegas.

Posted by: Average Joe | September 30, 2008 4:54 PM


Wow....how about do for yourself???? That is the problem to many American looking for the Govt to help them out of a situation. DO FOR YOURSELF... pay attention and quit watching American Idol...read some history do some math so we dont keep making the same mistakes.

Posted by: Thomas Jefferson | September 30, 2008 4:55 PM

I believe the FDIC/Congress should raise the the limit to $1 Million per Consumer account. Businesses and Consumer accounts should be provided unlimited protection of deposits, on a co-pay provision, beyond the $1 Million limit.

Posted by: RJ | September 30, 2008 4:57 PM

If Congress approves a temporary increase in FDIC insurance limits, will they also increase the insurance limits on credit union accounts (NCUA)? I would think it would be only fair to give credit union members equal protection.

Posted by: Credit Union Eunice | September 30, 2008 4:57 PM

My family has always gone against the prevailing life style here in the USA. Rather than spending money like a drunken sailor, we save at least 30% of our income, have zero credit card debt, and have an affordable home mortgage. Simply, we live beneath our means. For example, we drove fuel efficient cars (30+ MPG) back in the 70s when gas was less that 50 cents a gallon, and still choose do so today. We've never owned an SUV, and never will.

It's time for all of us in America to start living within our means. The credit crunch was only a matter of time, as it was bound to happen, and frankly, I think it's a good thing.

The big question on the FDIC is: If banks start failing like falling dominoes, will the FDIC have enough funds to guarantee depositors' money. This should be the operative question.

Posted by: Colloquor | September 30, 2008 4:58 PM

"the amount of ignorant comments on here is scary...in case any of you wonder why we have a bunch of idiots running the country, its because we have a bunch of idiots electing them.

if you don't know anything about finance do yourself a favor and pick up a book."

I would have to agree with the person who contributed the post above, this forum is demonstrative of the ignorance that runs rampant in the US.

Where do all of the elected idiots come from? From the larger pool of idiots who live, work and vote in America...Education is the key to unlock our future prosperity, and I'm not talking about creationism or intelligent design, I'm talking about real science, math, engineering, economics etc. This is what Chinese and Indian students are drilled on, and why their workforce will soon outpace ours in scientific fields.

If some of the poor "victims" of the evil "predatory lenders" took the time to educate themselves on the mortgage product they were signing up for, to understand what ARM stands for, they might not have been caught so off guard on year three when the payments ballooned.....Same goes for the regulators and executives who allowed cultures to exist where they closed the loan first and asked questions later (like, do you have income and assets to cover this loan)....

Posted by: Agreed | September 30, 2008 5:10 PM

Dear Mr McCain
I don't have $250,000 to deposit in a bank, will your $700 Billion gift to Wall Street put the $250,000 in my new bank account. ?

Posted by: SadAmerican | September 30, 2008 5:13 PM

How does increasing the insured limit to $250,000 help the situation?

Most people don't have $250,000 in a savings account or CD. Why not abolishing the income taxes on the savings/CD/money market accounts interest? There were enough banks around at one time where if you were getting close to the FDIC insured amount, you'd simply open another account in another bank.

By abolishing the income tax on interest, you'd be giving the people an incentive to save. Essentially, what this Administration has done by reducing the capital gains tax to 15% is to force people to invest in the stock market in order to make anything on their investment. With the income tax on the savings/CD/money market accounts, you're being taxed at your personal income rate. That's not very smart if you're trying to get people to save.

Posted by: Hello | September 30, 2008 5:18 PM

Why do the politicians, the newspapers & Tv stations all talk about the terrible affects the Rich will have to endure if they don't get the $700 Billion Gift from Middle Income America. Since us poor folks will be paying this $700 Billion to protect our rich friends, what rewards will we get ? Why has Middle Income Americans been forgotten ? Unless Bush / McCain changed the laws, we're still allowed to vote ??

Posted by: SadAmerican | September 30, 2008 5:25 PM

I would not be so quick to point a finger at one side of the isle or the other, but I do think back during John Kerrys campaign when the statement was made that more people own homes (bank owned) than at any time in the history of the world, and Mr. John Kerry stated that the lower class did not own homes, and what are the Republicans going to do about that? Through the country's desire to make all treatment fair, congress came up with a plan to get financing for everyone, including those who can't afford to be purchasing a home. Now we are paying for a generous heart. Why Bush endorsed this type of bleeding heart legislation I'll never know, but the price of trying to reach across the isle is now so great that it is taking major action to correct the wrong legislation.
I understand a previous comment concerning more education, but the problem is you can't teach common sense!

Posted by: Cochino | September 30, 2008 5:31 PM

Hello nailed it. eliminate the tax on savings accounts and bank CDs.

Posted by: million | September 30, 2008 5:32 PM

I don't think they should set a specific new limit. I think they should either:

1) Have no limit and let the actuaries figure out what premiums the banks need to pay to accomplish that.


2) Let the banks choose their limit and pay premiums based on the limits they choose. They can then advertise their limits to would-be clients. (Bank A pays 2.5% on a 3 month CD but only has $100k in FDIC coverage while Bank B pays 2.4% on a 3 month CD but offers $500k in FDIC coverage.)

Posted by: Anonymous | September 30, 2008 5:39 PM

BTW, Eliminating the cap and pumping funding into FDIC is a major part of Jamie Galbraith's very common sense solution to avoiding the $700B payoff to Wall Street.

Search for Galbraith on the post to find the article -- "A bailout we don't need" or some similar title.

Posted by: Anonymous | September 30, 2008 5:44 PM

Cochino wrote
Through the country's desire to make all treatment fair, congress came up with a plan to get financing for everyone, including those who can't afford to be purchasing a home.
Cochino, for some odd reason when John Kerry suggested that banks should lend money to lower income people, I don't think he meant to people wanting that vacation house on the beaches, that second house outside the suburbs, that flip house and investor wanted to make $40 to $50K from in a month or two, or the interest only AMR's that allowed someone to buy a $1 Million dollar home when they could afford a $400K home.

The banks got themselves into this over GREED, pure and simple. Don't blame the poor schmoe in the low income bracket who can't afford the rent to keep a roof over his family's head, but the bank was "oh so caring" that they offered him an 5 year ARM on that "fixer upper" that the broker told the buyer that it was too enticing to ignore.

Posted by: Hello | September 30, 2008 5:53 PM

When dow went down 777 points we loose one trillion + dollers, today 480 up, do we gain 600 + Billions ?. Does math work this way? May be foreign banks/Companies are buying the stuff when it is down, innocent American listening scary things from these great Democrts and off loading their Stocks/Mutual funds at rock bottom price and wealth is going out side USA.

Posted by: Sudhirprannath | September 30, 2008 6:07 PM

"How does increasing the insured limit to $250,000 help the situation? Most people don't have $250,000 in a savings account or CD. Why not abolishing the income taxes on the savings/CD/money market accounts interest? There were enough banks around at one time where if you were getting close to the FDIC insured amount, you'd simply open another account in another bank."

True, most people don't have $250k +, or even $100k + ... but many businesses do. And those of us who run such businesses have to spend an inordinate amount of time in rocky times such as these moving money from one bank to another and opening alternate accounts in alternate banks (where we don't have a personal banker relationship and aren't familiar with the products available). In doing so, we weaken the banks with whom we do business by pulling out every dollar we had with them over $100k.

And so what if we spread our money around. Have we reduced the FDIC's exposure to our accounts? No. While we've reduced the amount they would be on the hook should our bank fail, we've increased the likelihood that they will be paying out to us in the first place.

The $100,000 limit -- if savings were unaffected by a limit -- is economically pointless so long as it applies per institution, which it does. That is to say, it is not a limit at all as long as people and companies with >$100k spread their money around. And if it is not a limit, then it need not exist.

The advantage to lifting/eliminating the limit, though, is that more banks are sustained because there is no panic.

Consider two hypotheticals:
1) Limits: Three banks have deposits of $20 billion each. One has bad loans and tips toward insolvency. The other two are also driven toward insolvency because businesses and wealthy individuals draw down their balances to protect their assets. You have the insolvency of three banks with $60 bln worth of deposits and the FDIC had to make whole about $50 bln of those deposits and sell the debt vehicles off at auction for $0.20 on the dollar.

2) No Limits: Three banks with $20 bln in deposits each. One goes insolvent based on bad loans. FDIC spends $20 bln to make whole all of those deposits and gets about $0.10 on the dollar for the bank's loans (remember, it's just the one with bad loans that went insolvent). Depositors in the other banks, knowing they'll be made whole if their banks go down, stay put and their banks are fine.

Posted by: Anonymous | September 30, 2008 6:10 PM

A temporary increase?

Keep it simple and sensible: No limit on accounts insured by the FDIC.

The insurance is a service to the depositor and should be born by him, which would result in a miniscule decrease in the interest rate the deposit earns.

Should have been this way all along.

Posted by: WylieD | September 30, 2008 7:11 PM

CDARS are available now for 50 million in FDIC Insurance. This is obviously for the rich and business. I think we should raise it to 1 million for personal and retirement accounts. We saw people loose money at Indy Mac who were not "rich". We need to mandate a 5% interest rate on these insured deposits with the Federal Reserve taking the money back overnight at the same rate. The only way the banks can make money is to start lending again above 5%. Let them keep the "toxic" assets on their books. This will cost in the trillions but remember bank deposit interest is taxable. It would also help stabilize the dollar and attract foriegn money (we need it). Remember when all banks paid 5% and you got a toaster to move your money.
We need to get money flowing into the banks, these are basic institutions that need more confidence. We need bold action that can be explained to "ordinary americans".
Uncle Billy lost the deposit. It's a Wonderful Life.

Posted by: Michael L | September 30, 2008 7:12 PM

The lack of actual information on this crisis is disturbing. Most likely this is Al Qaeda attacking us financially. The have been letting us get used to their money in our banks and now have coincidentally decided to withdraw it all it once. hmmmmm

Posted by: Old man of the mountains | September 30, 2008 9:07 PM

Obama, How does an increase on the FDIC cap (from 100k to 250k) help main street? Last time I checked, main street does not have 100k+ sitting around in a checking account.

Are you trying to help your friends, again, who so generously gave to your campaign?

Do us a favor and quit acting like you care for the middle class.

Posted by: Nick | September 30, 2008 10:03 PM

Three and a half years ago, John McCain belatedly cosponsored an apparently "dead" bill on mortgage regulation. He then did nothing else to revive it or bring it back up for consideration.


S.190 - A bill to address the regulation of secondary mortgage market enterprises, and for other purposes.
Sponsor: Sen Hagel, Chuck [NE] (introduced 1/26/2005)
Latest Major Action: 7/28/2005 Senate committee/subcommittee actions. Status: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.
Sen Dole, Elizabeth [NC] - 1/26/2005
Sen Sununu, John E. [NH] - 1/26/2005
...time passes...
7/28/2005 (the date of this bill's LAST activity)
Sen McCain, John [AZ] - 5/25/2006

10 MONTHS after anyone had looked at this bill, McCain blew the dust off it and cosponsored it. He didn't do anything to push it forward, and the bill never saw any more activity in the Senate.

That seems to demonstrate a serious lack of leadership. It also continues the pattern of McCain stretching the truth, distorting the facts and outright lying to get elected. "Journalists" need to do their jobs here. Explode this MYTH. McCain has stood for deregulation. His has not been a reformer on the economy. His tax cut for the rich is more of the same.


Posted by: McCain Deregulation Is The Problem | October 1, 2008 1:45 AM

For context, there's a nice summary of deposit insurance limits around the world here:


Looks like a couple countries actually insure unlimited amounts.

Posted by: MoreInfo | October 1, 2008 3:45 AM

Does this include NCUA insurance for credit unions? Does anyone know.

Posted by: Shawn | October 1, 2008 9:22 AM

It was during the Clinton Years when the average American consumers started carelessly spending money. Most were spending their entire paychecks rather than saving. And most were spending the money they didn't have on Credit Cards with extreme interest rates.

I knew it would come crashing down one day.

Rents were increasing from stabilized rents of $300.00/month to de-controlled rents of $850.00/month.

This was acceptable and willingly paid for by people who made $40,000 and above.

But for people who worked the same 40-hour week and only made $25,000 or Less...this was a big struggle. How could they pay utility and for food, if most of their paycheck went to rent?

Home values increased rapidly and unfairly as the same careless people willingly paid way over the actual home value.

Usually a home appreciates by 5% per year. But since the mid-1990s on, homes were increasing anywhere from 100%+ in Value.

For example): A home that was worth $100,000 would go on the market with an asking price of $250,000. The careless consumer, on advice of a commission-gulping agent would offer $300,000. This would drive up the values of other homes in the neighborhood.

On top of that, the uninformed buyer who didn't do any homework on homebuying, took out loans that were way too high for them to ever pay off. They would also take out extra money on that home loan to buy motorcycles, cars, big television screens, etc.

Now we all have to bail them out. Never mind the damage to the economy this carelessness did.

The cost of renting or buying a home was unbearable and unfair. Especially to the lower income people who knew they couldn't afford it and therefore refused to give in.

Minimum wage of the 1990s stayed very close to the minimum wage of the 1980s, although the cost of paying rent was more than 50% of people's paychecks. Min wage in 1980s was about $3.55/hr and I remember it was about $7.00/hr sometime in the 1990s.

So while the cost of renting went up over !00%, the base min wage stayed just about the same.

The majority of people did not bother to complain or bring this to the attention of law-makers. They just continued on their merry pathway to self-indulgence and self-destruction.

Also the savings interest rates in the 1980s was way above 5%. Sometimes you could get 10% interest savings accounts. However, high savings interest means high loan interest, thus people weren't buying up 3 houses at a time at ridiculous prices.

In the 1990s, the savings interest rates were a joke. They were so low, that you could make no money in savings accounts.

Min wage stayed the same, but people who were lucky enough to get high-paying jobs, were just as willing to spend it all.

The stock-market became a new trend for the new wealthy middle-class people. Although they knew there was risk involved and not fdic insured.

Another strange thing is the FDIC insurance stayed at the $100K Limit--the same limit in the 1980s.

It was like minimum wage...although the cost of living went up, the FDIC insurance staggered at the same 1980s rate.

Did the Clintons forget about raising minimum wage and fdic insurance in the 1990s?

I want to add that there were many hard-working people who had the common sense to not over-spend, save their money in the bank. Paid their bills and didn't greedily buy 3 homes at a time and cheaply flip them for an extra 100K.

These are the people who take the burden, but the Democrats didn't care about them either.

Its BOTH the Democrats & Republicans who were ignorant to the Laws of Economics.

Posted by: Anon | October 2, 2008 12:47 AM

Restoring calm is essential, which is why any increase should be permanent rather than temporary. I can't imagine how anyone would even consider voting Senator Obama into office now, as he is for zero accountability. What's all this talk about "bad mortgages", as if they had a life of their own? It's bad BORROWERS who got us into this mess. Whoever mentioned US savings being zero is correct. Save nothing, live paycheck to paycheck, and borrow a heck of a lot more than you're capable of repaying. The liberals just HAD to "level the playing field" of home ownership, ushering in the era of subprime loans. People on welfare for God's sake and even those not here legally were given loans! "Oh, you're on welfare? No problem - we'll just put you in as "stated". It's time to hold the PEOPLE responsible for their actions, ranging from those at the lower socioeconomic levels who had no business buying a home, to the "over the top" greed mongers on Wall Street. ONLY when we start returning this nation to the REAGAN DAYS, will we see an improvement.

Electing someone like Obama who wants to take money from heads of household like myself making upwards of 75K a year, and giving it to electively unemployed 40 somethings who'd rather collect WELFARE than GET A JOB.

It's all about accountability, folks. Will YOU be accountable on Election Day? There is only one choice, as the WRONG choice will result in dire consequences.

Posted by: Lorraine in NJ | October 7, 2008 12:58 PM

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