One of the big news items in the last few days has been modifications to the failed bailout government bailout bill. One item that just floors me that has had quite a bit of discussion in the last few days is increasing the FDIC insurance limit on accounts from $100k to $250k.
Sounds great at the surface, right? Protect folks savings. Very important. Except, who with any real financial sense, has over $100k in savings sitting in an ordinary account at ONE bank? The current FDIC insurance protects retirement accounts (IRAs, not investments) up to $250k already per person, per bank. So if you have $100k in First Bank of Podunk and $100k in Last Bank of Podunk and $250k in your IRA at Podunk Bank, you’re fully insured by the fed already. So unless you have OVER $100lk in a single bank in ordinary bank accounts, this has NO impact on you.
This combined with the fact that the average savings rate in the US has been negative for years and declining prior to that for decades. I’m pretty convinced that only really really REALLY wealthy people have this kind of cash just sitting around liquid in CDs.
I’d like some more time to research this, but this is my gut reaction. How about reducing credit card rates so people can actually pay them off? That might affect most Americans.
October 5th, 2008 at 12:57 pm
Don’t forget one important point – since a greater dollar value is insured, will a higher premium be demanded of the banks? They’re hiding it for now under the guise of “we needed more money in the insurance fund anyway” banter, but only time will tell.