Obama doing a smart thing----

Quote from jordanf:

I don't even think 250,000 is enough. Maybe 1 million. 250,000 says "we aren't really that confident in the banks either".
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This is a good point. They should at least expand the limit for business acounts (payroll, accounts rec, ect...) to $1m. Individual accnts at 300-500K would be OK.
 
Quote from Pa(b)st Prime:

It's no idea at all.

The issue going forward-if lending losses increase-is the solvency of the FDIC itself.

The FDIC is dangerously underfunded. If my figures are correct the FDIC has assets of around 50b against insured deposits of over 4 trillion.

In a weird sense upping the insurance coverage to 250k per account is akin to the same over leverage that's caused much of this crisis. I've made this point on a recent thread, FDIC insurance is mis-priced relative to systematic risk.

Here was my analogy:

Writing auto insurance is a no-brainer. There's zero chance that every car you insure will have an accident this year. Storm insurance is the complete opposite. If one home gets hit a bunch of OTHER homes will also sustain damage. Hence there is SYSTEMATIC risk in writing storm policies. This crisis is a storm.

The FDIC works great if just one rogue institution goes under. A car accident so to speak. Try applying that risk model to the tsunami of multiple bank failures.
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FDIC has an effectively infinite budget, since Fed/Congress would print money rather than see the entire banking system become insolvent.

The loss would essentially be taken via rapid inflation, rather than destruction of nominal dollar savings.
 
Quote from Cutten:

FDIC has an effectively infinite budget, since Fed/Congress would print money rather than see the entire banking system become insolvent.

The loss would essentially be taken via rapid inflation, rather than destruction of nominal dollar savings.
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your absolutely correct.

the fdic is just a printing press.
 
Obama is a politician nothing else, McCain is a lame old duck who has overstayed his invitation in politics. US is in trouble as firm leadership like Reagan or Clinton is missing and chaos and mess is spreading fast. :mad:
 
Quote from Cutten:

FDIC has an effectively infinite budget, since Fed/Congress would print money rather than see the entire banking system become insolvent.

The loss would essentially be taken via rapid inflation, rather than destruction of nominal dollar savings.
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Normally it would be an IDENTICAL process to JPM's and C's "bailout" of WM and WB . The Fed's role would be as guaranteer of liabilities.

For a funding action beyond the cash resources of the FDIC it would take a Congressional vote. The FDIC is NOT a "backed in full faith" entity of the Treasury. If it was, guess what? CD's would trade at PARITY with Treasuries. They don't.
 
Quote from Pa(b)st Prime:

In theory the TED spread (deposit rates vs. T-Bills) should be the amount of premium charged to depositors for FDIC insurance. Good luck getting something like THAT through Congress....:p
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No argument there.
 
http://www.reuters.com/article/busi...Type=RSS&feedName=businessNews&rpc=23&sp=true

WASHINGTON (Reuters) - The chairman of the House Financial Services Committee has told lawmakers that a federal bank regulator will seek authority to increase the deposit insurance limit to a level above its current $100,000, said a source familiar with the chairman's thinking.

Representative Barney Frank, a Massachusetts Democrat, has told lawmakers of his committee that Sheila Bair, chairman of the Federal Deposit Insurance Corporation, will soon request the authority to boost the level of insured deposits, the source said.

Presidential nominees Barack Obama and John McCain both proposed an increase in federal deposit insurance to $250,000 from $100,000 as a way to broaden support for the bank asset bailout bill rejected on Monday by the U.S. House of Representatives.
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This may impact small business owners looking for loans but right now small businesses arn't even close to the main problem. The main problem is banks lending to other banks.
 
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