FDIC asks to boost deposit limits

Federal agency that backs bank deposits asks Congress for the authority to increase the amount of money that it can insure in bank accounts.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Chris Isidore, CNNMoney.com senior writer

sheila_bair_fdic.03.jpg
FDIC Chairman Sheila Bair.
Photos
The crisis: A timeline The crisis: A timeline The crisis: A timeline
A shocking series of events that forever changed the financial markets.

NEW YORK (CNNMoney.com) -- The federal agency that guarantees bank deposits is asking Congress for temporary authority to raise the limit on the amount of money it insures for individual bank accounts.

Federal Deposit Insurance Corp. Chairman Sheila Bair put out a statement late Tuesday afternoon asking that Congress allow her agency to increase the $100,000 limit per account that has been in place since 1980.

"Unfortunately, there is an increasing crisis of confidence that is feeding unnecessary fear in the marketplace," Bair said. "To address this crisis of confidence, I do believe that it would be helpful for the FDIC to have the temporary ability to raise deposit insurance limits."

Bair did not say what she thought the new limit should be. FDIC spokesman Andrew Gray said simply, "We'll leave that to Congress."

In 2005, Congress approved having the deposit insurance limit pegged to inflation. But that annual increase won't start until 2011 under current law.

The FDIC's request comes less than a week after two of the nation's largest banking institutions essentially collapsed and as investors worry about more bank failures.

Washington Mutual, the nation's largest savings and loan, became the largest bank failure of all time Sept. 25. None its depositors lost any of their money though as the FDIC arranged a sale to JPMorgan Chase (JPM, Fortune 500).

Monday Wachovia Corp. (WB, Fortune 500), the nation's No. 4 bank holding company by assets, sold its banking assets to Citigroup (C, Fortune 500) for a fire sale price in a transaction brokered by the FDIC.

Raising the amount that the FDIC can insure could stem a potential run on deposits by bank customers, particularly businesses, who fear losing their money. The $100,000 limit protected as much as 82% of deposits in 1991 but only covers 63% of deposits today.

The change in the $100,000 cap will be of particular benefit to small businesses, many of which use bank accounts to hold money for pay salaries and operations. The FDIC insures up to $250,000 in individual retirement accounts.

The idea of raising the limits had already drawn support earlier in the day from Democratic presidential candidate Barack Obama and his Republican rival, John McCain. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.