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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (43160)	12/20/2005 5:54:22 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 116555

Bill Lifts Ceiling On U.S. Insurance Of Bank Accounts By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL December 20, 2005; Page A2 online.wsj.com After years of lobbying, bankers won an increase in federal deposit insurance for retirement accounts as well as regular savings accounts. But smaller banks were disappointed because they had sought more deposit protection. The legislation will raise federal deposit insurance levels on retirement accounts to $250,000 from $100,000 and will gradually increase insurance ceilings on regular savings accounts from the current level of $100,000. The measure passed the House early yesterday morning and the Senate on Saturday. It is expected to be sent to President Bush for his signature soon. The final bill doesn't boost insurance as much as many lawmakers or community bankers wanted. The current limit of $100,000 for each basic deposit account will remain until April 1, 2010. At that time, the Federal Deposit Insurance Corp. will have the option of raising the ceiling by $10,000 and every five years thereafter based on inflation. Insurance covering retirement accounts will also be pegged to inflation. Coverage limits apply to bank, thrift and credit-union accounts. Community banks had lobbied for an immediate increase in the insurance on deposit accounts to $130,000, arguing that it would help them keep customers from taking their business to bigger interstate institutions. But large banks successfully argued that the boost would require all financial institutions to pay large premiums. Indeed, most changes in the FDIC overhaul, the first in two decades, would benefit major banks, which have complained that they had been forced to pay more than their fair share into the bank-insurance fund. Following the savings and loan crisis in the late 1980s, which also affected many banks, the FDIC insurance fund plunged into a deficit in 1991 and had to be replenished. Large banks contributed for several years to fully fund the insurance pool. Under the legislation, those banks will get credits against future premium payments from a special $4.7 billion fund. Premiums haven't been required since 1996, so many new and some fast-growing banks haven't paid anything. The legislation would cause new banks to pay a greater share of premiums but generally reduce future payments for most financial institutions. The bill also merges the FDIC's bank-insurance fund with the thrift industry's fund; their combined assets currently total $48.3 billion. The measure "puts a cap on the new, combined fund so that too much money won't accumulate in Washington when it can be put to better use in American's communities," Edward Yingling, president of the American Bankers Association, said in a statement. .