Finance Geek

Provisions in both Senate and House bills extending the temporary
coverage cap of $250,000 for deposit insurance until 2015 could be as
damaging as the now defeated “cram-down” provision in the proposed
changes in the bankruptcy code. Extending deposit insurance coverage
helps few families, and those helped are among the wealthiest, while
reducing market discipline on our banking system. As the temporary cap
is in place until December 31st, Congress appears to have plenty of time
to examine and debate the issue.

Tucked away in the TARP bill was in increase in the then $100,000 cap
for deposit insurance to $250,000. That “temporary” cap was set to
decline back to $100,000 on January 1, 2010. With no hearings on the
need for this increase, or any report language on the provision, one is
left to assume Congress believed that depositors would panic and
withdraw their deposits above $100,000 from our banking system in the
absence of this protection.

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This entry was posted on Wednesday, May 6th, 2009 at 8:54 pm and is filed under RealClearMarkets. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.