Obama got this right.
 

http://money.cnn.com/2008/09/30/news...ion=2008093008

Raising the FDIC limits.

I agree on raising the FDIC limits, though it's kind of a no-brainer to
help shore up eroding confidence...

Back at the ranch, however, the FDIC's captial reserve continues to
plod along at ~ 1.25% of the trillions in banks that are "covered".
The practical side suggests that since not many/all of the bank
deposits are "at risk" and, not many of depositors are making a bank
run, then that slim "reserve" suffices. But, it is a slim reserve.

For us with a few bucks, the hard part is to spread the dough around
so we aren't too much at risk, being over the coverage limits and not
having to move dough to several institutions.

Check out the FDIC calculator. You might find you are actually covered for $200k or more, in one account/one bank.

Yeah but that doesn't help small business. I don't even feel that 250K does, but it is a step in the right direction, should be more like 500K for a SB account.

Thanks Doc...I was aware of the FDIC & SPIC rules. We just bump
well over the "limits" in a couple of accounts, but I don't want to bust
those specific accts up. I'm not losing sleep over it, vis a vis the coverage
limits. Since I have been whittling equites for the past 9 months, we have
accumulated a lot of cash&cash equivs., but I'm not worried about that
cash.

Still think it's a good idea to bump the FDIC/SPIC limits across all the
categories. Speaking of the FDIC, they have been doing a very good/very lucky
job in the past few weeks, imo.
BR,mD

I don't see how this helps at all, other than the "emotional bump" it will give to depositors.

Interesting comments -

I'm in the same boat as mD as starting tomorrow 10/01 I officially join the ranks of the retired. I'll have to begin liquidating my corporate-based portfolio since I'll no longer be able to buy stocks at a discounted rate. Fortunately, I'm spread across several financial institutes in order to maximize the FDIC coverage.

But increasing the coverage also increases expense of banks to fund the FDIC which is $0.10-$0.15 for every $100 deposited based on the current $100K cap. Bumping the limit up to $250K will invariably add to the premium.

When banks fail, and they will continue to do so, the banks that survive now be paying an increased premium because of 1) the additional limit, and 2) to replenish the fund lost through the insurance of failed banks.

Will increasing the FDIC limit stop banks from failing? Nope. It's simply a post-failure remedy and does nothing to proactively prevent the failure from happening.

What is does create is an even bigger bill to pay when banks fail.

Let's give credit where credit is due. This discussion about the FDIC limits has been circulating since the beginning of the year and was one of the ideas tossed around when Bush was packaging his Economic Stimulus proposals. There was an article in the NYT examining such a proposal. Both Obama and McCain both jumped on the bandwagon - Obama just happened to get to a microphone first.

When was the last time the coverage amount was raised?

Partly true, but some of us do have more than the $100Gs, $200Gs
and $250G hurdles, (based on particulars), and I enjoy having some
swag at those places...to be completely safe, under the exisiting
regs, we would have to split some stuff up and move it to other
banks/institutions.

Having a couple/three places to "watch" my dough is easier than having
it in a dozen different places with a dozen monthly reports, imo.

Yes, it will "cost" more as aswadude pointed out, but reasonbale cost.
The ~1.5% ratio the FDIC is playing with also does not remain fully
comfortable if the crap really hits the fan...
BR,mD

Blue, from my fading memory, I recall 1980 was the last time they pumped it to the
current $100Gs first tier. It was orig. ~$10,000 back in circa '33 under the Glass-Stegall Act,
if I remember my Money&Banking class correctly.
BR,mD