FDIC has received approval from the Treasury to extend temporary deposit insurance from the end of this year to 2013. Originally, the amount of money covered when deposited in a FDIC-insured bank was $100,000. However, the temporary extension allows for funds to be insured up to $250,000 during this period.
This extension is due in part to Congress approving higher borrowing limits for the FDIC. Now, the $30 billion line of credit the FDIC receives from the Treasury has been increased permanently to $100 billion. Even more, until 2010, the FDIC will be able to borrow as much as $400 billion more from the Fed, if needed.
Is FDIC Insurance Coverage Really Safe?
But while these numbers can create a sense of relief in individuals who are interested in making sure their money is safe somewhere … anywhere … in the financial world, some believe that money is no more secure than in the stock market. Here are a few reasons:
- The number of deposits insured by the Deposit Insurance Fund (DIF) is around $6.4 trillion according to OA, as opposed to the official number thrown out by FDIC, which is $4.8 trillion. Critics say the number released is lower to allow them to stand behind the extension being called “temporary” and is dishonest, making them maybe not so trustworthy.
- The Treasury is already in its own deficit. So while it said that the DIF can’t go bankrupt because it is borrowing from the Treasury, is this really true?
Everyone is looking for some form of security after losing hundreds, thousands and maybe even millions of dollars in stocks, bonds, CDs, money markets, 401k funds and much more.
Will the FDIC deposit insurance extension save the day? No. But it can help a few more people feel more comfortable about sitting their money somewhere for a few more years.
