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In the last day, senators have tried to sweeten the rather bitter pot
they've been stirring by increasing insurance for depositors by 150%.
For the last two decades, the Federal Deposit Insurance Corp. has
ensured every deposit at a U.S. bank or thrift to a limit of $100,000.
Under a deal hammered out Tuesday night, that limit would increase to
$250,000, all in the interest of protecting Main Street in the pending
bailout package.
Sounds good so far. But there is a catch.
Since Franklin Roosevelt introduced deposit insurance in 1933, the
program has been financed by premiums paid by banks. It was a logical
source of funding since it cloaked banks with the image of stability.
(Weren't those the days?)
But the main aim of the bailout package is to stabilize the financial system, and a massive increase in FDIC premiums would be one more expense that banks don't need right now. So the senators have agreed to increase the maximum limits of deposit insurance, but not to increase the premiums. They are making up the difference by temporarily removing the current $30 billion cap on the amount of money the FDIC can borrow from the Treasury. If the measure carries, there will be no limit on the amount of money the FDIC can borrow from the government. So the proposal protects Joe Taxpayer by insuring his deposits with a pool of money that will be borrowed from ... Joe Taxpayer. If the banking system is more resilient than the current fears indicate, then this won't make any difference. But there have already been 13 bank failures this year, and if there are any more then the taxpayer may be lending the money to finance the insurance for depositors. And the bankers shouldn't be too smug about getting higher insurance for free. The $250,000 limit will likely become permanent, and the banks will be hit up for higher premiums in a year or two. - Peter Moreira See TheDeal.com story: FDIC seeks more deposit protection See related WSJ story See related Bloomberg story CategoriesComments Deal Video
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Hopefully this credit repair, it just wasn’t enough for everyone to cover up more financial issues that we tackled on but what more than it just that they may have seem a lot before, before they was begin to.
Apparently, it wasn’t enough to cover the mortgage crisis up with a TARP. No, Treasury Secretary Paulson’s Troubled Asset Relief Program wasn’t the kind of credit repair scores the endangered homeowners needed. Now that Federal Deposit Insurance Corp Chairman Sheila Bair has pushed a new mortgage modification program forward, 1.5 million homeowners will have someone new on their side when they’re facing foreclosure. This $24.4 billion program will be drawn from the $700 billion pool that TARP set up, and it’s a very straightforward system. Lenders will be given a stipend of $1,000 per loan they renegotiate with financially stuck homeowners, and in the event of default on a loan, the FDIC has promised to take on up to 50 percent of the loss. Paulson has condemned this, as mere spending that will only bankrupt the FDIC; others view this action on Bair’s part as a needed investment to maintain liquidity in the mortgage industry. While this won’t solve all of the problems at once, it’s certainly a valiant effort to help repair credit, isn’t it? Click to read
Click here for more information on http://personalmoneystore.com/moneyblog/what-is-credit-repair/