Remember when the FDIC raised their insurance limits from $100k/depositor to $250k/depositor? That extended coverage was set to expire at the end of this year. This left some savers wondering what would happen if the increased limits were allowed to expire.
Well… Just a few days ago, the FDIC announced that the expanded limits would be in place for an additional four years, saying:
Deposits at FDIC-insured institutions are now insured up to at least $250, 000 per depositor through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100, 000 per depositor for all account categories except for IRAs and other certain retirement accounts which will remain at $250, 000 per depositor.
In case you’re curious, the increased NCUA coverage limits have likewise been extended. It’ll be interesting to see if anything changes between now and the end of 2013, or if the coverage limits will be allowed to fall back to $100k.
While the limits do not bother most private individuals, it was a royal pain for small business to have to divide their operating reserve among multiple banks. But fortunately a group of smaller banks had figured out a workaround called CDARS (CD Account Registration Service). You tell your bank to secure this million-dollar amount, and they carve it up into 100K sized chunks and place each one with a different partner bank. Then each of those partner banks places a corresponding chunk from one of their customers back in your bank. Nice work-around.
Still, it was a convenience when the limit went up to $250K, because that allows us to keep our normal operating cash reserve in a single institution.
I don’t expect it to ever go back down.
We haven’t closed the barn doors yet….you know, the doors that said: free for all trade and let them bleed you.
We need to RE-regulate all these vampire financial industries (and a few other industries whilst we are at it) or the same thing will just repeat and our financial blood will continue to escape into the night…
Debt without end and smoke & mirrors just don’t hack it. This admin has tried to stave off disaster with infusions of blood money….but it is still seeping out the other end…gotta close those open doors of deregulation.
The ethers have communicated to me that the recession will end the day Obama leaves office. Until then, the prudent move is to keep your head down and pray for rain. The Swami has spoken.
There’s no need for a massive move of money between banks if they do reduce the limits. If people in general would quite freaking out and look at their options, they’d see that’s not necessary. The limits are per account styling, so it is entirely possible to have more covered at one financial institution that just $250,000. Even when it was at $100,000, I had several clients that we had completely protected up to $800,000 – even though they didn’t have that much. The accounts were styled such that if she ever did have that much, she would be covered.
I think it far more likely the Fed decided to keep this limit because it has people are saving and there’s a general lack of trust in the stock market at present. People are afraid of losing money, so they’re parking it within financial institutions where they can be assured that at least some of their money will come back to them if something happens. Either way, we should hopefully be out of this recession by 2013, so consumer confidence in the markets and financial industry should also return as well. We’ll see.
Hopefully we’re out of the recession by 2014. Then again, when I have more than $100K in the bank, I can start worrying.
For now, at least the fact they’re doing it is a nice peace of mind.
It would never make sense for them to reduce the limits now. That would only cause a massive move of money between banks.