Must read about FDIC insurance
I think it was utterly wrong to increase the FDIC insurance. I completely disagree with a 100% insurance with no deductible to the insured. That first 100k should have a 5% deductable. I think it is a good idea to have increased it, but not with the idea of zero risk to depositors. Banks have behaved irresponsibly and depositors have gone after high yields without concern for consequences.
Badly behaving banks should lose their depositors because depositors have the incentive of trying to protect that 5%.
I am all for increasing the guaranteed amount, but the deductible on the second100K should be 10%.
Safehaven has what I think is a very common sense and fully logical post on the dire straights of the FDIC insurance right now.
The more I think this through the more I think the media bite about the bailout package is to get banks to loan again is absolute rubbish. I think the banks are in such dire straights it is to prevent mass bank failures based on the existing bad loans. I think it is so that when you go to your bank to get some of your money out you actually can.