FDIC raising from limits $100K to $250K. Yay or Nay?

[Broken Arrow]

Raising FDIC limits won't do much in my opinion. Most people who need to get around it already have, and the majority of America is well under the $100k mark. It might restore a tiny bit of confidence in the banks, but it's not as much as you might think.

I agree with this.

On the other hand, there's really no downside to adding this provision. Plus, those who have had to work around it no longer have to get around it as much, which can only help.

And anyway, the vote was so close last time that, who knows, maybe something like this is enough to put it over the top....

[tripods68]

It absolutely works under the current FDIC rules. Joint accounts are insured separate from individual accounts because they are titled with two owners. The $250k limit only applies to IRA accounts.

Raising the account/IRA insurance to $250k/$500k would result in $3.5M of total coverage.

I meant just on FDIC insured regular savings account with own personal account + joint. You are looking over $200K above FDIC limit. Have you gone to your bank and talk to a personal banker/manager and verified this? Because that's what people really want to know and to feel secure about their money.

[boosami]

On the other hand, there's really no downside to adding this provision.

It may not appear so from this thread, but I actually am for raising the coverage. As a single person, my FDIC coverage is meager in comparison to what families and married folks enjoy. I would want to know exactly where the additional money is coming from, though, so I can be sure it's not from my pocket! I don't want to pay taxes for a FDIC increase that I don't technically need to feel secure at this point.

I also don't necessarily agree with the bailout plan, and think the FDIC coverage should be handled as an individual issue for inflation reaons. In this case, I think it's purely a political move.

[disneysteve]

Raising FDIC limits won't do much in my opinion. Most people who need to get around it already have, and the majority of America is well under the $100k mark. It might restore a tiny bit of confidence in the banks, but it's not as much as you might think.

I agree. It won't do anything to ease the current conditions, but it still should be done. I'm sure a lot more people bump up against the 100K limit today compared to 28 years ago when that limit was established.

[boosami]

But have you gone to your bank and talk to a personal banker/manager and verified this? Because that's what people really want to know and to feel secure about their money.

I don't need to, I am very familiar with the FDIC coverage rules. As should be anyone with over $100k in the bank who ever visits a branch or has a personal banker. As mentioned before, the vast majority of people are nowhere near that $100k mark so they have nothing to worry about.

If you call the bank and ask, they will verify. I am 100% positive that they have all answered a ridiculous volume of FDIC coverage questions since the failure of IndyMac, and they all know the FDIC like the back of their hands.

[jIM_Ohio]

This helps banks lend more money and encourages savers to keep money in cash, allowing banks to lend more money because of higher assets.

Long time coming, and I think little things like this might improve the market's liquidity.

[tripods68]

I don't need to, I am very familiar with the FDIC coverage rules. As should be anyone with over $100k in the bank who ever visits a branch or has a personal banker. As mentioned before, the vast majority of people are nowhere near that $100k mark so they have nothing to worry about.

If you call the bank and ask, they will verify. I am 100% positive that they have all answered a ridiculous volume of FDIC coverage questions since the failure of IndyMac, and they all know the FDIC like the back of their hands.

Boosami,

I have no reason to doubt your knowledge when it comes to FDIC rules. I don't personally keep up with that either. I don't expect regular people either. But I did worked as a Personal Banker once for Wells Fargo for 3 years. As I remember FDIC rule is something we hardly discussed with client anyway. We know it exist and it covers up to $100K per account. Anything beyond like "creative titling", we made sure we check with our legal department so not to risk our clients money. Having said that--if someone is claiming something to be true based on their own personal knowledge, I would want that verified or check reference(s) and not rely on assumptions. But that's just me. No offense.

[simpletron]

boosami is correct about getting around the FDIC limits. read this for more information: FDIC: Insuring Your Deposits

there is a caveat to the revocable trust to son & daughter. it is 100K per beneficiary, so you can have 200K in the account and not all be cover. for example a revocable trust to son & daughter where the son gets 75%, the daughter get 25% and has 200K in it. then only 150K is covered - 100K for the son and 50K for the daughter.

boosami, why are you worried about the cost? you said that when IndyMac failed, only 500 million wasn't insured and IndyMac was the third largest bank failure in US history. 500 million is nowhere near 90+billion extra you're thinking about. plus FDIC fund is paid for by the banks. so any raise in that fee would be passed down to the customers in someway(raise fees, lower interest on savings, higher interest on loans) or the bank would eat the cost.

[boosami]

Verification from the FDIC itself:

Joint Accounts

Revocable Trust Accounts

[boosami]

boosami, why are you worried about the cost? you said that when IndyMac failed, only 500 million wasn't insured and IndyMac was the third largest bank failure in US history. 500 million is nowhere near 90+billion extra you're thinking about.

I'm not worried about the cost of lost funds over the coverage amount for bank failures. I am worried about the cost to taxpayers if the FDIC coverage amount is increased. If the coverge goes up, that means the FDIC budget has to go up. And who pays for that? Taxpayers, like me and you. I don't want to pay more taxes for an increase that I don't think is necessary given the current FDIC rules.

there is a caveat to the revocable trust to son & daughter. it is 100K per beneficiary, so you can have 200K in the account and not all be cover. for example a revocable trust to son & daughter where the son gets 75%, the daughter get 25% and has 200K in it. then only 150K is covered - 100K for the son and 50K for the daughter.

That is correct. However, with revocable trusts you can change the beneficiary information whenever you please, so you can modify that ratio as dictated per your health or economic stressors, or anything you want. When setting up trusts to ensure coverage, they aren't really for the benefit of those named in them, though that can certainly be a plus. I have POD accounts set up for my parents, who are well prepared to retire and will never need that money.

[kork13]

I would want to know exactly where the additional money is coming from, though, so I can be sure it's not from my pocket! I don't want to pay taxes for a FDIC increase that I don't technically need to feel secure at this point.

I am worried about the cost to taxpayers if the FDIC coverage amount is increased. If the coverge goes up, that means the FDIC budget has to go up. And who pays for that? Taxpayers, like me and you. I don't want to pay more taxes for an increase that I don't think is necessary given the current FDIC rules.

My understanding is that all banks who are a member of the FDIC (pretty much all banks anymore) pay what we can call "dues" to the FDIC. I'm not sure if the USG puts ZERO money into the FDIC pot, but I do know that the large majority of it is contributed by banks. Most likely result (if any): rates on deposit accounts may go down slightly, or loan rates may go up, in order to cover the higher requirement for banks to pay into the FDIC. ......or at least, I sure HOPE that they have to contribute higher, because if not then the FDIC could find itself horrendously under-funded.


I agree with most that this change can only be good. While it's true that most people don't have more than $100k just chillin' in a savings account, it is still a vote of assurance, to make people more comfortable with depositing their money. This could also be a boon to business owners who back their business with personal funds--they probably deal with higher dollar figures than most people, so having a higher level of protection would be very beneficial to them.

One last thing I'll mention... This action by the senate (assuming it passes) is actually just a jump-start to a bill previously approved. Starting in 2011, it has already been decided that the FDIC coverage limit will start tracking inflation. What this does do is raise the starting point for that inflation adjustment. Instead of tracking inflation based on a $100k starting point, the starting point would now be $200k. So this should end up quite nicely for everybody...

[tripods68]

$100,000 in your name (Ok Insured up to $100K per account)
$100,000 in spouse's name (Ok insured up to $100K per account)
$200,000 joint account (Not OK - This whole amount is Over $100K FDIC Insurance)

Am I missing something?

[kork13]

I'll just add this on, I found it just a second ago...

Source: FDIC website
The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. With an insurance fund totaling more than $49 billion, the FDIC insures more than $3 trillion of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.

[boosami]

$200,000 joint account (Not OK - This whole amount is Over $100K FDIC Insurance)

Am I missing something?

Joint account = two owners. $100k insured for each to a total of $200k insured.

Direct from the FDIC Web site:
Example: John and Mary have a $220,000 CD at an insured bank. Under FDIC rules, each person's share of each joint account is considered equal unless otherwise stated in the bank’s records. John and Mary each own $110,000 in the joint account category, putting a total of $20,000 ($10,000 for each) over the insurance limit.

Account Holders Ownership Share Amount Insured Amount Uninsured
John $ 110,000 $ 100,000 $ 10,000
Mary $ 110,000 $ 100,000 $ 10,000
Total $ 220,000 $ 200,000 $ 20,000

[kork13]

So I know this may be getting in too deep, but just out of curiosity... A long time ago (like when i was... 2 or 3yo) my grandparents opened a savings account at their local credit union in my name, so they could put money in there for me at their leisure. My grandmother, my mother, and I are all listed as owners on the account. Does that technically mean that this account could be covered up to $300k (under current rules)? Not that I expect to ever have that much in there, but hey.... just interesting to consider...