Raising FDIC Insurance … Why Temporary?

The latest minor fix for the economy since the so-called “bailout” didn’t pass is to “temporarily” raise the upper limit on FDIC insurance to $250,000.

In 1980, the limit on FDIC insurance was raised to $100,000 from $40,000 where it had been set in 1974. That probably was an accurate reflection of the change in the value of the dollar between those years which was initiated by the Arab Oil Embargo of 1973.

Does anyone believe that $100,000 today has the same value as $100,000 in 1980? Is the price of a house, car or loaf of bread the same as it was in 1980? Is the price of a ticket to go to a movie the same as 1980 or the price of a bag of popcorn?

The simple answer is “NO”.

The primary reason for raising the FDIC limit is to re-instill confidence in the banking system. If it’s necessary to “re-instill” confidence in the banking system then that means there has been a false sense of security for a very long time.

When the FDIC was originally established the limit was set at $10,000 in the 1930’s. I don’t think anyone believes that $100,000 will buy today what $10,000 would buy in 1935. This is just another place where the banking system has been “cheaping out” on their depositors and it’s time for another “permanent” corrective action which is long overdue.

So … why temporary?

It has been nearly 30 years, hasn’t it?


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