Obama wants to raise the FDIC limit to 250K
By John Amato Monday Sep 29, 2008 7:15pmAs we've seen a lot that takes place on Wall Street comes from perception as well as real numbers so I think it was a smart move for Obama to ask that the FDIC insurance on our bank accounts get raised to 250K. It gives people confidence in their banks and will ease a little tension there. What would happen if everyone withdrew their money from from their bank out of fear? Talk about a nightmare. He needs to lead on the economy and this is a good step.
"The majority of American families should rest assured that the deposits they have in our banks are safe," Obama said in a statement put out by his presidential campaign.
"That is why today, I am proposing that we also raise the FDIC limit to $250,000 as part of the economic rescue package - a step that would boost small businesses, make our banking system more secure and help restore public confidence in our financial system."
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.
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I dunno, it still feels like just moving the goalposts :(
And a short while later, McCain said the same thing.
Gives one pause that McCain might be tagging along on Obama's coattails. Nah. McCain taking one of Obama's ideas as his own? Whodathunkit.
Not sure Wall Street will like this. Might encourage folks to bail on stocks in a move to all cash.
Nope, Wall Street won't like this at all...
Of course. It's presumtuous for Obama to suggest such a thing. But if McCain does it it shows leadership.
Everyone CAN'T withdraw their money at the same time because it DOESN'T EXIST.
"Fractional reserve credit", look it up. To use an appropriate net-ism: you'll shit brix.
This is a good move. Already the reThugs are claiming this as their own proposal. Just when you thought that these people simply can't get any lower, they surprise you.
Lifting the limit on FDIC insurance was James Galbraith's idea. You can read his proposal here.
"Senators Obama and McCain have arrived at the idea of raising the FDIC deposit insurance limit from $100,000 to $250,000. Obama introduced the idea in a statement this morning, and McCain, in a round-robin series of interviews, made the same suggestion. The FDIC already guarantees retirement accounts up to $250,000."
WTF....McCain, Obama and Barney Frank have "arrived at the idea"??
Uh, excuse me but this idea was supposed to have been in yesterday's bill but was shot down in the Democratic caucus. It was first put up by Rep. Nick DeFazio (D-OR), one of the true heroes in this mess.
These three stooges aren't not "leading on the economy". They're following...Wall Street's lead.
I like the idea. It hopefully will keep people with large sums of money in the bank from panicking and taking all their money out in fear of their bank being the next one to fail. It has become a self fulfilling prophecy. We hear of other banks failing and in fear we quickly withdraw our money. If enough people did that at the same bank, they could cause their own bank to fail, when maybe up until that point it was solid.
Of course McCain chimed in when he saw it was a winning suggestion from Obama.
Lyon @ 5:
That's why they're scared to death of a run on the banks....now the people have to make them scared to death of IMPEACHING and RECALLING them.
I suggest that the people who AIDED AND ABETTED THIS SCAM pay the price for it.
A bit of prison wouldn't hurt, IMHO.
much more than anything mccain has offered. you gOBAMA!
why the hell do we accept a financial system that allows people to borrow money that doesn't exist??
The jig is up...to bad the musical chairs tune ended during our time....
McCain and his supporters are the gifts that keeps giving. Add the Alaskan Air-Head, and this is turning into a circus. Not only did Mccain steal Obama's change theme, he has hi-jacked Obama's finacail plan. What a joke! I swear McCain wants to lose.
This is where I'm so ashamed of having a degree in business, because I can't seem to connect the dots here. So we raise the insurance coverage on savings accounts. - how does this connect to the crisis except that if you pull out of securities, there is more room to put it in savings accounts? Is that it? Every fallen bank seems to have been purchased by someone, so those account weren't at risk were they? Couldn't you always just open up another account once one goes over 100K anyway?
I'm only sure of one thing. Unfortunately, this one has no effect on me.
I wonder what gaffe-tastical way Grampa will respond to this...
Given the effect of inflation on the original $100 G's, it only seems reasonable to raise the FDIC limit. That's pretty much a no-brainer. Where things get dicey is how to distribute the $700 Billion. I vote for "bottom up", not "top down". I also vote for serious jail time for those all along the food chain who have abused the system over the years.
#1 Open the Books. Government Year End audit.
-Kucinich tells Fox8 what's wrong with bailout bill
http://kucinich.us/index.php
"Yesterday marked a day that will go down in history, when Congressional Democrats and Republicans alike took on full responsibility to protect the interests of taxpaying Americans, and defeated the deceptive bail out bill, defying the dictates of the Administration, the House Majority Leadership, the House Minority Leadership and the special interests on Wall Street."
How To Stop Run on Banks
http://globaleconomicanalysis.blogspot.com/2008/09/how-to-stop-run-on-ba...
Audit of the cost of War
http://www.youtube.com/watch?v=c3hp8Qaf_q0
Basel-II Compliant?
In today's world, a small business feels a lot better if $250,000.00 of their money is insured than they do if only $100,000,00 is covered. If the level could be raised even higher the confidence would soar. Until people feel their money is safe in a bank, which they surely do not feel now, the banks will be lonely places except for the withdrawal lines.
Notice how McCain is always calling for Obama to join him in doing things and Obama just ignores him. Obama won't follow McCain but McCain is quick to follow Obama when Obama leads with an idea. So who is the real leader in this contest?
I guess it's a start...
I dunno. For my money the only gaggle with a real bead on things from the perspective of the people is over at counterpunch.com
For real... a little reading can go a looooooooooooooong way.
cheers
I saw that Obama had proposed this in a post at 10am at 11:30am McCain was saying the same thing.
Johnny2Bad @ 8:
Oh and one follow-up. Defazio said today (on the Thom Hartmann Show) that his other idea...Reviving the FTT (Financial Transaction Tax) of .25%. on all trades to finance the this mess.
Q: Guess who was the only iunvited speaker at that meeting and who came out hard against that idea and said (according to DeFazio) "The Street won't like it"?
A: Dr. Laura Tyson, former Clinton and current Obama advisor.
Q2: And what Wall Street firm's board does Dr. Tyson just happen to sit on?:
A #2: Morgan Stanley.
Huh. Go figure.
Typesbad @ 15:
Some banks failed while others were purchased. If your bank was purchased, your money, no matter how much you had in the bank, is most likely okay. Each bank only insures 100K per customer, no matter how many accounts you have there or where that money might be.
Let the homeowners re-negotiate the mortgage rather than let it go to foreclosure.
Here's a page with some common Q and A regarding the FDIC
I understand the preventive nature of avoiding runs on the bank; but, most middle Americans don't have $100,000.00, let alone $250,000.00 in the bank. We DID have a meager retirement fund that has evaporated since this administration's onset. Why doesn't some political leader talk to this major need of most Americans. Insure our retirement funds. That would be for main street average Americans; therefore, not worth the attention.
I suppose we must be grateful that someone does care about those Americans with a quarter of a million in savings; I only lament that does not impact the majority of us.
I for one am tired that the RICH have so many politically elected advocates that not a one has asked for rescinding the taxes that they are exempt from paying (well except for Obama), especially in this time of economic bailout packages. We however continue to pay our fair patriotic share and then some.
doesn't solve the root of the problem... I don't care if my money is insured.. I care that my money will be worth something when I go to use it.
Eddie Felson @ 24:
Or do what FDR did in 1932. Buy the forclosures and offer them to the original mortgage holder.
"FDR's resulting legislation established the Home Owners' Loan Corporation. The HOLC was authorized to issue new loans to replace the existing liens of homeowners in default. Instead of a short-term, interest-only loan, the HOLC loans would be fully amortizing over 15 years, meaning that when the last payment was made, the borrower owed nothing further to the bank and owned the home free of any debt."
Bottom-up rebuilding 101.
martian @ 1:
right. it's a good idea in general but it won't do anything to help the economy
.
Q U E S T I O N:
Since Bush flooded the stock market w/ $650,000,000,000.00 Tuesday...
And CONgress passes a "BAILOUT" for $700,000,000,000.00 Wednesday...
So.....
WHO GETS THE TOTAL PACKAGE OF $1,350,000,000,000.00 ???
ONE POINT THREE FIVE TRILLON.... or... 1.35 Trillion for the short screw.
.
Embittered-Anti-Republicrat Max-Hussein-1 @ 30:
ANSWER:
Here's a chart that congress is using that explains everything.
Kinda.
I'm all for the idea because I think it will calm people's nerves.
However, I am curious about how many Americans have $100K (in any form) leave alone in an FDIC-insured account.
(I keep reading about how the U.S. has a negative savings rate, with the average person only having a few tens of thousands in a retirement account and a similar amount in home equity, and nothing more.)
Anyone have pointers to some data?
This really does seem to be a BandAid on a tumor sort of response. The problem this is trying to address is to prevent another WaMu style bank collapse so we don't have to have another Fed sponsored take over. Each time that happens the Fed has to toss billions into the deal to make it go through. This is happening at the same time the Fed is trying to toss billions more into the liquidity problem. They're fighting a two front war (hmm, where has that ever gone well?) and they want to make one of them go away. They're hoping this will ease the fears of the small business owners, etc. that are getting antsy about their working capitol and are pulling it out of the banks, S&L, thrifts.
For real fun head to Wikipedia and read up on the various money supplies and how they interact. Note that M0/M1 are a small fraction of M2/M3. If we suddenly had large numbers of people and businesses cashing out all the time deposits and other holdings there just isn't anywhere near the amount of cash to cover it. If we're forced to print 8X the cash we have on hand to cover it all the dollar will drop by the equivalent amount and suddenly you're buying gas for $25.00/gallon. On the plus side, if you have a fixed rate mortgage the inflation might make it a tiny fraction of the cost -- assuming you still have a job and your employer raises your wages enough to be able to buy food, etc. Always looking for that silver lining...
Name @ 32:
I had the same notion. With a negative savings rate the following statement doesn't help too many folks:
"The majority of American families should rest assured that the deposits they have in our banks are safe.”
There is no way a majority of americans have that kind of cash savings. And with interest rates where they are on savings accounts this is only a token move. If people still have their retirements locked up in 401k's that are sinking and they don't have the youth or health to wait for their accounts to rebound then they have to consider the penalties of withdrawling them. Chances are they will choose to leave them in because their position is too weak to do anything beneficial. Jim "Boo-yah" Cramer called for the FDIC insurance to be raised to one million dollars (raises pinky to edge of lips). Clearly that is only to help the rich folk. But with all the bank consolidations going on how much of their money can be insurred. I'm willing to bet not as much as they would like. Gold, bonds, and t-bills are the investments they're chasing.
Obama is too stupid to come with anything, so he comes up with $250K idea. Who cares.
No individual (except for the rich, and excluding businesses) has $100K let alone 250K$ in
the bank. Obama is fake opposition, bought off by the rich just like McCain. 2 Party system
is a lie, Pelosi = worlds biggest sellout.
I been thinking why this hasn't been done for over 30 years.
This is a point for Obama since I thought Obama was a corporate Democrat
and was like most of the Democratic cowards who have voted in lockstep with most of the GOP in regard to Iraq, FISA, Patriot act, etc. etc. After reading book the book titled "This Improbable Quest" by John K. Wilson, I was originally enthused and taken with Obama and that "Audacity Of Hope" theme. But then the Hillary mess and Obama's conduct has caused me to rethink and I believe Obama is like Al Gore and John Kerry who cannot defense and parry the Republican strategies and attacks and was going to go into the Gore-Kerry self-destruct mode for the presidency.
Well, at least he is not a member of the DLC (Democratic Leadershit Council).
Frankly, my dear, I don't give a damn about people who have their life savings reduced to a mere $100,000 - not counting their house, cars and other non-bank-account assets, of course. (Anyone who has that kind of cash has probably paid off their mortgage(s) and owns their cars outright - there's no reason to subject yourself to commercial lending rates if you have a *choice*.) That's not even counting the possibility of holding your cash in several different banks (IIRC, the limit is per depositor per bank).
It's like the estate tax - the limit is so high already that most people could hardly dream of reaching it on tiptoe, so proposing raising it still further just provokes complaints of "Who's that going to benefit? Not anyone I know, that's for damn sure."
The FDIC doesn't have any money to actually pay out anyway, even if the ceiling was still $100,000. Raising it is a ploy that may work on a pyschological level, but just as with social security, here's no money in there, just an IOU.
Carl Matthews @ 35:
Are you serious? Having the government back your money is more important now than ever.
To say that nobody but the rich has $100,000 is silly. Pretty much ANYBODY who's been putting aside 401k or IRA money has more than $100,000 saved by the time they retire. My parents do, and they never made more than $40k a year.
When you get older, you don't necessarily want that money invested in stocks. (Wonder why.) So having it safely protected and backed by the U.S. is a good idea.
This is How to Fix the Economy plain and simple:
1. Re-Establish Regulation on Financial Institutions.
2. Place Restrictions on their executive management.
3. Raise the amount of FDIC Insurance retirement funds.
4. Force Banks to Pay us back First with Interest.
5. Fix the Taxation System.
The way I look at it, raising the FDIC amount helps give people (who make investment decisions based on emotions) a feeling of security. A good deal of the middle class around 50 years old have retirement accounts that are 250k or more.
How many people living on "Main Street" have $250k sitting in a bank account? Not very many.
It's rather sad how Dennis "Department of Peace" Kucinich and Bernie "Socialist Lite" Sanders can't say anything about our country's financial/economic crisis without framing the discussion as a "class war."
Not to mention these "hindsight is 20-20" financial bloggers and their clueless readers who actually look to them for insights. If these guys were really as prescient as they would lead their hapless followers to believe, they'd had made enough shorting Fannie/Freddie to be happily soaking up the sun in the Caribbean by now. Truth be known, most of them are just fronting for the gold pumpers.
The government took in beaucoup taxes during the housing boom. If freaking bureaucrats didn't spend every dime they can lay their hands on, then maybe "we the people" might have a few hundred billion laying around to effect a rescue. Wise people live below their means. Why can't government do the same?
While I am a person of little consequence, there are an amazing number of things that I know w/reguard to this finiancial melt-down! We the people have done this to ourself! I have met every American President starting with Ësienhower all the way up to George W. Bush, except for Ford and Regan! Macain, I do not remember meeting, but Obama, I met him in the early 70's. Dewight David Esienhower proably said it bestand I quote: from pre-teen memories, "right now I am the most famous person in the world, everybody wants to sign a peace treaty and they don't want to sign one with anyone but me. They all want ther treaties to say the same exact thing. Some of those countries are so far behind us that it will take them 20 to 30 years to catch up with us. They are to stupid to realize that we are not going to put our soldiers in two different countries shooting at each other! By the time they catch up with us I will be dead and then the world can think any thing they want to think about me."
We the people of the USA have allowed our goverment to focus on the world and failed to focus on ourself! Wake up America as our breaking apart is because we have spent so much money on the world that we have forgotten to keep our own country in check! It is a growing virus that will continue to grow untill we have regained the confidence of the world!!!
Obama is too inexperienced and McCain is too old!!! No one person can fix this problem but we the people, united, WE CAN!
What Lyon and Memory Hole Troll have said. Obama's suggestion is nice, but it does nothing to address the systemic risks we're all facing. I suspect the real reason all these experts are milling around like confused sheep is that none of them have a clue what to do, or even what the extent of the crisis is. Personally, I think that if our debt-supported economy is going to crash, and it has to at some point, it's probably easier and cheaper to get it over with now; putting it off only means building a higher house of cards.
Yeah, genius plan. The FDIC is currently underfunded. Has anyone bothered to check its total assets? Where will it come up with the extra cash when the shit hits the fan? Oh well.
Is anybody here familiar with the Basel Accords, of which the U.S. is a member? THIS may be the real reason behind the alleged "credit crunch" ========Basel II is an international business standard that requires financial institutions to maintain enough cash reserves to cover risks incurred by operations. The Basel accords are a series of recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision (BSBS). The name for the accords is derived from Basel, Switzerland, where the committee that maintains the accords meets.
Basel II improved on Basel I, first enacted in the 1980s, by offering more complex models for calculating regulatory capital. Essentially, the accord mandates that banks holding riskier assets should be required to have more capital on hand than those maintaining safer portfolios. Basel II also requires companies to publish both the details of risky investments and risk management practices. The full title of the accord is Basel II: The International Convergence of Capital Measurement and Capital Standards - A Revised Framework.==============The US has requested several time extensions to come into compliance. Time's just about out to meet the requirements,OR< the OTHER banks who are in the accords WON'T LOAN money or deal with the US banks.
The three essential requirements of Basel II are:
Mandating that capital allocations by institutional managers are more risk sensitive.
Separating credit risks from operational risks and quantifying both.
Reducing the scope or possibility of regulatory arbitrage by attempting to align the real or economic risk precisely with regulatory assessment.
Basel II has resulted in the evolution of a number of strategies to allow banks to make risky investments, such as the subprime mortgage market. Higher risks assets are moved to unregulated parts of holding companies. Alternatively, the risk can be transferred directly to investors by securitization, the process of taking a non-liquid asset or groups of assets and transforming them into a security that can be traded on open markets.
LAST UPDATED: 28 Jan 2008
This isn't Obama's idea.
Who does this help?
Do any of you have a quarter million in one bank account? Hahahahaha!
This sounds like a good idea on the surface. However I worry that it just means more government-backed funds for the bankers to gamble with. Remember, this deposit insurance was started when commercial banks and investment banks were strictly separated. Commercial banks had deposits, which are covered by FDIC, and investment banks used investment funds, not covered by FDIC. That all went away during the deregulation frenzy of the last ten years. Now the investment banks all own commercial banks, so they have insured deposits as chips at the craps tables. No one seems to mention this aspect of the whole mess.
There are as LOT of people that have $100,00 in the bank. That's why they have "jumbo" ($100,000) CD's. Not everybody has wildly gambled their retirement funds. When my grandparents (who lived through the depression) died, ALL their funds were in CD's or bonds. Plenty of people don't understand or trust the stock market, and don't want to risk their life savings, so they put their money in CD's and savings accounts with zero risk. They didn't lose a dime. Don't knock it if you haven't tried it.
OTOH, if you have a "jumbo" CD, typically the bank wants to either roll over your interest into your CD, compounding your interest (now you're over the $100,000 limit, and if your bank fails, you lose all your interest), or transfer your interest into a checking or other account at the same bank (which is over the limit, and you lose all the interest). We've been through this with our life savings,and it is frightening to know that you lose all your interest either way.
We ended up having to have the money mailed in a check, so we would never be over $100,000. And that means a lot of senior have to have checks in the mailbox on the first, and are subject to theft. It's safer to transfer it in-house to another account in the same bank for them to write check on.
Why not make it a billion 'cause billionaires have so much to lose. And they take all the risk just to create jobs for the Chinese.
Oh yeah. I forgot. Billionaires don't keep money in banks. They own real stuff, like land and oil and defense companies.
"What would happen if everyone withdrew their money from from their bank out of fear? "
That will not solve the problem. A better question to ask is:
What would happen if everyone refuse to pay a single penny of TAX to the FEDERAL GOVERNMENT? Would that bring fear through their SPINE? That would be a more effective THREAT. WE people revolt; this takes the attempt of LOOTING out of the equation. Not one penny; not one dime of FEDERAL TAX until we give our consent to pass and approve the rescue bill. THEY MAY HAVE THE SIGNATURE but 99.99% percent of the 300 million AMERICANS can STILL KILL THE BILL when WE UNITE.
Psychological warfare is all this is. It'll work on the people who actually don't know dried dog shit from nails. What fuckin crazy person has $100,001+ in a single bank account? It's sitting idle! How do you insure a fractional reserve bank system anyway? The money isn't there. You sure as shit can't do it with the FDIC when it only has enough to cover at best 2% of the deposits we have now. So does this call to raise the coverage limit also include raising the fees to maybe...nevermind. It's just turd polishing anyway.
martian @ 1:
Exactley. It could be 400,000. If the bank aint got the money, they aint got the money.
Any business with 100 employees or more could easily have over $100K in FDIC insured accounts just for payroll. There are also plenty of retired people with large amounts of money in FDIC insured accounts. Raising the limit not only protects them it also encourages people to deposit more money with their banks. If the banks have more money the crisis will pass more quickly.
shaggles @ 53:
Any business with that many employees is certainly using multiple bank accounts at multiple banks. Using CDARS these businesses can have $50 million insured. Couples are insured up to $200,00 per account. You can have multiple accounts at an institution and get coverage to around $1 or $2 million in cash. I think the raising of the limit is trivial in theory. In practice any effect is psychological rather than real.
I can see the benefit for small businesses and retirees and people getting close to retirement who don't want to risk their life savings on securities anymore. I'm in my mid 30's and have an above average salary. My money is all in my 401k and in the equity I desperately hope to have in my house some day. Most of my paycheck goes to my mortgage because houses in San Diego County are all priced very high. The most money I ever have in my bank account is a few thousand between payday and paying the mortgage. I suspect my situation is not uncommon.
I haven't heard Obama or anyone explain why raising the FDIC limit is important to us, including those that fit in the above categories. Some specific explanation from them of who this would benefit and how would be much more reassuring than what the politicians are saying now.
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