October 9, 2008
- A d v e r t i s e m e n t
We hear the parting words from television commercials and radio advertisements: “Member FDIC Insured.” The Federal Deposit Insurance Corporation has been insuring our money, our livelihood, up to $100,000. This was supposed to make working-class people feel safe and comfortable. But when a series of huge banks collapsed, falling like dominos one after the other, individual financial safety was put in serious jeopardy.
With the passage of the Wall Street bailout legislation, the rules for the FDIC have changed. The sum per bank deposit guaranteed by the FDIC has been temporarily raised to $250,000. The FDIC is also allowed to borrow from the Treasury to cover losses that might occur as a result of the new, higher insurance limit.
The FDIC, however, currently has enough in its reserve fund to cover only 1 percent of insured deposits. As of September 2008, the Deposit Insurance Fund had a balance of $45 billion, which is about $10 billion less than the amount projected in March 2008 for the end of the year. If there is an all-out run on the banks and everyone decides to try to collect their money, millions of workers might not be able to recover any of their money, let alone the up to $250,000 now guaranteed by the FDIC.