its a stupid solution.http://www.elitetrader.com/vb/showthread.php?s=&postid=2097186#post2097186 who do you think is going to foot the bill for that? 99% of the population doesnt even have $10000.Who do you think its designed to protect? think man, think
For years and every time I go into one of my five banks and renew my CD's, I tell the banker that the maximum needs to be raised. Does that make me an unsung leader of the free world.
Post of the year! The only question is whether the people will step up, when it really counts...............election day.
Who would expect a politician to have an original idea in the first place? thats not a president's job. these people aren't financial geniuses its there job to pick the best path from the suggestions there given.
It's no idea at all. The issue going forward-if lending losses increase-is the solvency of the FDIC itself. The FDIC is dangerously underfunded. If my figures are correct the FDIC has assets of around 50b against insured deposits of over 4 trillion. In a weird sense upping the insurance coverage to 250k per account is akin to the same over leverage that's caused much of this crisis. I've made this point on a recent thread, FDIC insurance is mis-priced relative to systematic risk. Here was my analogy: Writing auto insurance is a no-brainer. There's zero chance that every car you insure will have an accident this year. Storm insurance is the complete opposite. If one home gets hit a bunch of OTHER homes will also sustain damage. Hence there is SYSTEMATIC risk in writing storm policies. This crisis is a storm. The FDIC works great if just one rogue institution goes under. A car accident so to speak. Try applying that risk model to the tsunami of multiple bank failures.
Perhaps Obama will also suggest repricing FDIC insurance to reflect the risk. The limit needs to be raised, and logic would assume that that will be tied to repricing to reflect risk based on what has been learned from the current bank crisis..
In theory the TED spread (deposit rates vs. T-Bills) should be the amount of premium charged to depositors for FDIC insurance. Good luck getting something like THAT through Congress....
Actually the smart move would be getting rid of FDIC, instead of growing it. And that would be only the first step. But Obama is not there to do the right thing, not for the people at least.