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Wednesday, October 1, 2008

FDIC Insurance

I find it ironic that as a nation of un-savers, that the limit for FDIC insurance is 100K or two years salary.

If the median annual household income rose is $50,233.00 in 2007 then our banking says for your lifetime of earnings, we see 100K as a rational limit.

If I were looking at a fiancial statement of a nation and saw the limit at that rate, my interest would be, is there a nation that offers a higher level?

EverBank offers many products for the well-to-do clientele; one of their key products is a certificate of deposit that is FDIC insured up to 50 million dollars.

While I think that additional insurance cost should be purchased by a lender and borrower, I see this insurance as preferable to derivatives which are their own nightmare in a declining marjet, thus acceleating risk instead of mitigating it as the FDIC insurance does.

I have followed the FDIC insurance reaction to the challenges in the market, and by using their calculator at their website. I feel the POD rules allow money to "stay put" and reduce the violatility when depositors don't slash money around looking to balance deposits accross banks to limits under 100K. For payroll and small business's, second mortgage lines of credit, these 100K limits are not sufficient.

FDIC Simplifies Coverage Rules for Revocable Trust Accounts This was a good idea, looking into the legality of each and every account was ridiculous. Payroll's and Small Business can also benefit as buy-sell agreements and traditional buy-sell insurance (where a small business owner has a life insurance coverage) with a business partner is made more effective when POD is extended to checking.

I'm not going to say anything nice about the FDIC for doing a good job, they are expected to do a good job and are paid to do so.

But I support the expansion of limits both short term and longer where banks are required to clearly state in plain english their FDIC coverage and options in plain english and spanish on US websites and literature.

While some banks do this very well and make a business of this FDIC insurance, others do not!

I would think that for non-POD accounts that the higher limit suggested is a good idea.

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