Small Thing

If I had $249,999 in a bank savings account, I'd spread it evenly over three banks to stay under the FDIC limit of $100,000.

Barack Obama and John McCain, on the other hand, think that the FDIC should raise it's coverage to $250,000 so that those of us who have $249,999 in our savings accounts do not have to be inconvenienced by taking action to preserve our own wealth.

There are certainly bigger issues, in these times of financial doom, but I disagree. I think this is one of those times when people should be inconvenienced. Inconvenience forces people to think things throug ha little. It's also going to be hard for the FDIC to live up to its existing obligations in the next few months without piling more obligations on top of them. Right now, on this small issue, I think we need to stand pat.

People who are nervous should spread their risk over several banks.

And Congress should get over its bottomless wallet, feel-good bullshit.

If, when the crisis passes, we want to raise the level of insurance, then we should do that, and we can raise the insurance premium banks pay at the same time.

Right now, when no one knows what's going to happen next, I'm in favor of requiring people to be attentive to their own best interests. It seems to me that's preferable to asking our debt-crippled government to take on any more obligations it may not be able to fulfill.

Comments

[Frank]

I agree with you about raising the FDIC limits, but you don't have to spread it around among banks in order to be insured, so long as you have people close to you that you trust. You could put it in three cds, which if titled properly, could all be at the same bank and all be fully insured. In fact, if you count in a spouse, parents, grandparents, children, etc., I've seen a family insure up to $1.5 million at a single institution.

[fish]

And Congress should get over its bottomless wallet, feel-good bullshit.

Wait....yesterday when I said something similar wasn't that repudiated as a endorsement of Leninism?!

[Tom]

It's a fine line...

[Pursuit]

Don't even have to do that boys. The Reserve Fund, who broke the buck and are probably going to get consolidated, had a side bus. they sold to broker dealers. Basically, you give your broker up to 1 mil, and it automatically gets parsed out to 10 banks at 100,000 each. You get one statement, and full insurance. The product had something like 30 billion distributed through it

[PhoenixRising]

But for those of us who are too small time to pay a broker to keep us under the 100K insurance limit, the inconvenience of using multiple banks is well worth the small trouble it causes. Not only does it slow down the options enough so that we can consider them, it gives the deposits to more banks (in our family's case four) thus helping them to stay healthy and lending.

However, there are arguments for increasing the limits that turn on the notion that we might identify stronger and weaker banks more quickly without this depository diversification. Maybe that's right.

[Frank]

One other method you can use that skips the broker is to find a local bank in the CDARS network. You open a single CD with your local bank, they farm it out to other banks in the network. You see no difference in your statements and only have to deal with your original bank, but your money gets spread around for you and stays insured.

Now if I only had enough money to put all this knowledge to use.