Once upon a time the federal insurance on bank and savings and loan deposits was increased from 40 to 100 THOUSAND dollars.

Then a sick and ugly looking creature emerged from the swamp of anti-capitalism to free the S&Ls from investing primarily in housing.

200+ BILLION dollars later the Bank Of America was paid handsomely to gobble up smaller banks. (Don't search on BCCI and Packland . . I can't, resist, . . )

TODAY (i.e., this session), the guaranty is likely to be increased, over Greenspan's objections, to 130 THOUSAND dollars.

The swamp-thing has fully exhausted the 100 THOUSAND guarantee, and the tax-deferred pension scam has run its course and its time once again to bubble-up the guaranteed bank accounts. Just in time for the housing bubble to pop.

Do you think that 100 THOUSAND is not fair, and that 130 THOUSAND is fair? Inflation has not kept pace with this 18 year old limit. Yeah, yeah, yeah, that's what they want you to think.

However, you can take one MILLION or even 100 MILLION dollars today and get it fully guaranteed if you can find enough separate institutions to deposit 100 THOUSAND in each such institution. The swamp-thing called "Deposit Brokers" exist solely to provide a service of finding those institutions and distributing those deposits. We could reduce the guarantee to 10 THOUSAND and an INDIVIDUAL could still get more than a MILLION guaranteed, which makes one wonder just why the change from 100 to 130 is needed. I suspect that it is because the rich folks who hate the RISK inherent in capitalism have already fully saturated the 100,000 limit at each of the institutions nationwide. The only way to achieve greater protection is to increase the limit. This is NOT for the LITTLE GUY with a mere ONE MILLION because they can still get total protection by merely having ten accounts, one in each of ten separate banks -- they could move the money around in a single afternoon.

The only change in the law that is needed is to make ONE INDIVIDUAL entitled to a single ONE HUNDRED THOUSAND guarantee. This should include an examination of the beneficial parties to all trusts, retirement accounts, deposit broker accounts, etc, and require that the guarantee be assigned to the guaranteed party's Social Security Number. Bankers will scream that this is unmanageable. I would instead argue that the nominal beneficiary of the guarantee could be required to elect which specific accounts they want the guarantee to apply, contemporaneously with opening an account, and rules can be drafted ahead of time to resolve conflicts where total deposits exceed the 100,000.

I got ignored more than ten years ago by this guy here:

David Reinhard at davidreinhard@news.oregonian.com

on this fundamentally anti-capitalist, horribly inequitable, hardly camouflaged giveaway to fat cats.

Please help me at least get Mr. Reinhard to stand up and declare his views on the issue of "Deposit Brokers." For those readers who think I'm pissed at PERS -- this issue is even more troubling. Lawyers won't be whining about this one because the big boys are their clients and/or they see the potential future RTC legal fees that will be needed in a mere 4 to 8 years from now.

Has anyone else ever wondered just why the M2 measure of money supply is differentiated from the M3 measure of money supply based on the whether an account is less than 100,000 versus over 100,000 dollars? The objectionable bills now pending will probably, if passed, result in a modification of the definitions of M2 and M3 to reflect the new 130,000 dollar guarantee. With 5 TRILLION now in M2 , a significant portion of which is guaranteed, one need not question the importance of this legislation. It could fall under the radar just as did the tax treatment of Stock Options in 1995, where everybody said no no no we cannot possibly measure the value of stock options at the time they are granted, no no no we must wait until the options are exercised. This legislation is a giveaway that will require a few years to fester like an undiscovered cancerous growth until it has become an obvious grapefruit sized threat to bank's survivability, whereupon congress will be called upon to appropriate money to save our critical banking institutions. (The housing crisis at the time will force everybody to think that they must go along with anything that Bush proposes just after the mid-term elections during his second term in office.)

Modern Capitalism, as practiced by truly RISK INTOLERANT anti-capitalists, has become sick. I think I'll go puke now. . . .

UPDATE: Interesting note, potential for insured deposits at a single institution can reach 3.2 million.

The current $100,000 ceiling is even more generous when one considers that it applies to a single deposit account at a single insured institution. Depositors have two ways they can increase their coverage above $100,000. First, a depositor can maintain accounts at multiple insured depositories. With around 9,800 FDIC-insured banks and thrifts, there is almost unlimited coverage available to even the most well-heeled depositor. Second, FDIC rules treat individual accounts and joint accounts as separate accounts for insurance purposes. For example, through a combination of individual and joint accounts, a family of four can have $3.2 million in fully insured deposits in a single institution.6 The current deposit insurance ceiling of $100,000 appears to exceed what is required to protect small savers.

UPDATE: Senate Banking Committee.
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