Bank customers will see a temporary increase in FDIC coverage to $250,000 per depositor.
Included in the Emergency Economic Stabilization Act of 2008 was the provision for increasing Federal Deposit Insurance Corp. protection per depositor to $250,000 through December 31, 2009. The previous limit of $100,000 has been around since 1980 and was probably long overdue for an increase. The legislation provides that the coverage return to the lower limits at the end of next year, an unlikely event.
The bill will make it easier for savers to keep their money at one bank instead of spreading it around to keep the deposits fully protected. We wouldn’t expect this to have a positive effect on savings rates, probably the opposite in that banks pay the premiums for the FDIC coverage.
The expectation is that confidence in banks will increase and limit the kind of bank runs that hobbled Wachovia, WaMu and Indymac. It also increases the liability at the FDIC where $45 billion in funds protects $4.5 trillion in bank deposits.
