This is what the Senate is trying to do, with S. 896:
There is almost no justification for this high a limit (see details why, below the cut).
Why would we socialize risks of this kind? FDIC deposit insurance was set up with the intention of keeping unsophisticated people from losing their life savings in bank failures, not to pass out social guarantees to people with a quarter of a million on hand ...THIS is the real LEMON Socialism, that gets written into law, most everyday. Are you watching, Paul Krugman? God, I hope so. I mean, it's not the worst of lemon socialism because of the way DI is funded, but still.
...and it is the Republicans who are cranky-crying about taking advantage of crises!
Put another way, this demand isn't a very Larry Kudlowesque "hip-hip-hooray" for some nonsensical notion dubbed "free market capitalism". It says that rich people have no faith in banks and won't put their money in them without a Federal guarantee. Pause, a moment.
This is testimony from ... wait for it ... the head of the FDIC (what does that tell you about the power of 'special interests' on the Hill?):
The deposit insurance coverage level should remain unchanged. We see no evidence that the current limit on deposit insurance coverage is burdensome to consumers. Nor do we see evidence that increasing coverage across the board would enhance competition in the banking industry. Moreover, an increase in the coverage level would increase risk to the FDIC and, ultimately, taxpayers. Thus it would be imprudent to increase the FDIC's exposure at this time by raising the deposit insurance limit.
Increasing the deposit insurance limit would do little for the typical saver, given that the median deposit balance is far below the current ceiling. According to the most recent consumer finance survey data from the Federal Reserve, only 2 percent of households with deposit accounts held any uninsured deposits. The median income of these households was approximately double the median income of households with deposits under $100,000. Thus, any potential benefit from expanding deposit insurance coverage would likely accrue primarily to upper-income individuals.
