Better Than a Bailout: Boost FDIC Coverage to $1M

Higher deposit insurance would bring money in, help thaw credit markets
By Jim O'Neill,  Newser Staff
Posted Oct 1, 2008 10:17 AM CDT
Better Than a Bailout: Boost FDIC Coverage to $1M
Federal Deposit Insurance Corp. (FDIC) Chairwoman Sheila Bair listens to a question on Capitol Hill in Washington.   (AP Photo/Haraz N. Ghanbari)

Congress should stop fighting over the Paulson bailout, writes BusinessWeek economist Michael Mandel, and approve an expansion of FDIC deposit insurance to $1 million. It should also triple deposit insurance reserves to $145 billion. It would solve the immediate problem, calming the hysteria in the market, and attract funds to banks, he argues, and give Congress time to decide whether banks, and the housing market, still need federal support.

It’s an augmentation of an existing program likely to be greeted with open arms by both parties—and even by Wall Street, which once fought it as unfair to investment banks, Mandel says. Now, those investment banks are all but extinct. The expansion would calm Americans' nerves and avert a run on commercial banks.
(More FDIC stories.)

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