The public policy behind FDIC insurance is to provide a safety net to small depositors who don’t have the ability to do bank credit analysis.

FDIC insurance works well for small depositors. No small depositor has lost money in a bank account since the FDIC was established and small depositors don’t’ have to be bank credit analysts. The $100,000 insurance limit covers the deposits of most citizens and businesses in America. And, for most depositors that have more than $100,000, it is easy to split up deposits between institutions so that each insured deposit is under $100,000.

FDIC insurance is supposed to protect depositors, not undercapitalized banks.
The rationale for expanding FDIC insurance is to protect undercapitalized and non-competitive banks from the harsh reality of their actions and financial position. That isn’t the purpose of FDIC insurance and the public mission of the FDIC shouldn’t be expanded to protect bad banks. Large depositors are supposed to evaluate the credit of their banks and not do business with banks that are crummy credits. The essence of market discipline is that bad credits can’t borrow money and it shouldn’t be any different for banks. If commercial banks want to deal with large businesses, then they need to make sure that they have the appropriate capital base and are a good credit risk. This isn’t the first time in American history that large commercial depositors have had to decide which banks are acceptable and which are not. Such is the meaning of market discipline.

The problem of $100,000 insurance limits isn’t even a real problem. There are good private and public alternatives that extend FDIC limits.
Banks that belong to Promontory Interfinancial Network can offer banking deposits up to $50 million that qualify for FDIC insurance. There are approximately 2,500 institutions that belong to Promontory and are able to provide FDIC insurance on very large deposits. Using a $1 million deposit as an example, through the Promontory system, the deposit is split up among 10 institutions and therefore gets the full benefit of FDIC insurance. By the way, Promontory’s most well known founders are Eugene Ludwig (former Comptroller of the Currency) and Alan Blinder (former Vice Chairman of the Federal Reserve). This is a very legitimate and well known system for extending FDIC insurance. In fact, in today’s local paper where I live, the Sun Sentinel, there are ads from banks that are in the Promontory system touting the fact that they can offer deposit services for up to $50 million. Banks that don’t offer this coverage are doing it by choice and the Federal government doesn’t need to change the FDIC insurance limits to compensate for this decision.

There are public alternatives as well. As an example, savings banks in Massachusetts belong to the DIF insurance pool which insures all deposits (regardless of size) and acts as a supplement to FDIC insurance. DIF is state sponsored and has existed since 1934.

And, there are a wide range of additional solutions that large depositors can utilize if they want to keep their deposits at banks that they are concerned about. There is private credit protection that can be purchased and effectively supplements FDIC insurance. So, for a fee this issue of FDIC limits goes away. And, by the way, the banks that are weak and accepting deposits can arrange for private insurance and credit protection for their customers. They don’t need the Federal government to compensate for their decision not to purchase private insurance

Obama's whole solution is worthless.

If Libor rates really are at 6 7/8 like I heard on the car radio this morning, we're screwed - probably already waited too long to avoid some real hardships in the short term.

Fannie and Freddie acted in response to Clinton administration pressure to boost homeownership rates among minorities and the poor. However compassionate the motive, the result of this systematic disregard for normal credit standards has been financial disaster.

ONE key pioneer of ACORN's subprime-loan shakedown racket was Madeline Talbott - an activist with extensive ties to Barack Obama. She was also in on the ground floor of the disastrous turn in Fannie Mae's mortgage policies.

Long the director of Chicago ACORN, Talbott is a specialist in "direct action" - organizers' term for their militant tactics of intimidation and disruption. Perhaps her most famous stunt was leading a group of ACORN protesters breaking into a meeting of the Chicago City Council to push for a "living wage" law, shouting in defiance as she was arrested for mob action and disorderly conduct. But her real legacy may be her drive to push banks into making risky mortgage loans.

Hey Geevill,

Just as worthless as McCain's claim of victory yesterday morning and as worthless as Sarah Palin...LOL!

More than 200 former U.S. diplomats have signed a statement announcing their support for Democratic presidential nominee Barack Obama.
The former diplomats and ambassadors signed the statement before the Friday debate between Obama and Republican nominee John McCain.

"We are supporting Senator Barack Obama because of his judgment, experience, and ability to inspire people to come together around a common purpose," the letter said. "Senator Obama's talents offer an historic opportunity; for the sake of America's security and standing in the world, we must seize it."

The letter, signed by officials from both major political parties, said the foreign policies of the Bush administration have diminished America's alliances abroad.

Bush warns ? Lil Bush, Dubya, that mentral midget? He warned about the Iraq war also, how's that working out for you ? Cost 1.5 trillion dollars, over 4000 dead.This is a scam and a money grab by Bush and his people before they lose power. I hear he plans to pardon all 20 million illegal aliens.

Ex Republican

What does Ron Paul say? That is all that matters since he has been correct about all of this.

Bush and company are using every fear tactic they can to push through an economic recovery plan that would give them total control of the nation's financial markets. Then, they have until January 10 to squeeze as much as they can out of the markets so they can leave the next President with a total disaster across the board (foreign relations, war in Iraq, global commerce, etc.). McCain is part of the Bush cabal. His chief financial advisor is Phil Gramm, the architect of the deregulation movement that is the root of the problem, and McCain as a member of the Keating 5, which brought down the savings and loan industry in the 1980s.

HP Boston tries to make you believe it's the work of ACORN, a national community organizer association, so he can put the blame on OBama. But the truth is, the blame rests squarely on the Republican Party, which controlled Congress until 16 months ago, and the President.

Bush is nothing more than a modern day Nero, who watched Rome (Washington) burn as he played the fiddle. The last thing this country needs is McCain (and Palin, Leiberman, etc.) taking over and giving us four more years of the same.

Let every over-extended American individual and business sink like a stone. HOW DARE ANYONE EVEN ASK ME FOR ONE MORE PENNY TO SUBSIDIZE THIS RECKLESS, GLUTTONOUS, INANE AND MONSTROUS BEHEMOTH OF A BAILOUT FOR CROOKS! In a competitive market where there are, by design, supposed to be winners and losers, let the losers lose. I don't want to hear a peep from these pathetic swine, or their pimps, Bush, Pelosi et al. Let the losers go down in fglames. Its actually good for America for millions of credit-happy idiots to go down hard. Maybe the swinish OINKING instead of living will dissipate.

Paul: yesterday we, the main street....we lost 1.5 Trillion dollars when the market closed... uhmmm.
Ya, I think we have not seen anything yet.

Let me get this right. The republican president who has been the champion of deregulation along with his cronies in congress now want the tax payers to bail out these investment banks. Hmmm something stinks and I think it's the GOP's corpse. What happened to a free market? If your gonna live by it you die by it.

Not one Penny: the problem with your statement is 75% of America is made up of small business. If they can't get the loans they need to run... Let's put it this way... America will be out of work. Not sure what you do, or owns your business, but you could loose your job and not be able to get another one. See ya in the soup lines.

Burn Baby Burn!

Bush has been lying and crying wolf so much that although it is quite serious, it would be much easier and much less if the government gave 500k to all Americans 21 and older that are not in prison or have been convicted of felonies. The requirement would be that 100k be placed in a bank for 6 mos. All credit cards will have to be paid completely off and if in mortgage foreclosure, 250k is required to be paid immediately.

It would be far easier to give the money to Americans who could directly help America by coming via the front door and not the back by going through the investment banks.

Let them bail themselves out, which is quite easy.

Our wonderful leader warns us now? I mean seriously doesn't he have boxes to start packing, mail to fwd on, and newspapers to cancel?!
He doesn't care about the American people. he is trying to keep all his buddies safe. This bailout is not the ONLY way out of this mess. Why does the media and wall St have tunnel vision about this?!

This is the best thing congress has done in a long time. NOT RUSHED INTO a decision that is going to cost us more down the track LIKE THE WAR!
remember?!

help Sarah Palin clean up Washington, visit www.sarahpalinhasaposse.com

The answer is to stop the regulation of our markets by the Federal Reserve. Greenspan has created a huge prosperity bubble based on massive debt. No bailout will make a difference. The monetary system of the last 3 decades is fundamentally unstable.

It is hard to wrap ourselves around this crisis, but if we don't we will be the ones out of jobs, no money to feed out children, no retirement, we will be living in government ran tent cities.

Yes, I agree, I do not want to bail out the market or the rich but we have no choice. We have to do it smart however, we have to have protection plans written in that will work. We also need to hurry. yesterday we lost 1.5 Trillion in 401K, Pension Plans.. etc. today we could loose even more. The rich, they will be fine, Hell they have millions to get thru this mess, we do not, we need to try this.

People KNOW that Obama (and democrats) played a major part in this current crisis, and how the democrats wanted 20% of the BAILOUT?RESCUE money to go to organizations like ACORN….Obama THE COMMUNITY ORGANIZER!!!

beck - Why was 1.5 trillion lost. Surely if that invested money was placed in the market into companies with sound profits, the money would still be there. You are advocating more artificial stimulus based on inflation to prop up the market beyond where it should be. Sounds like a bad idea. We have squandered our wealth, and need our economy to contract to where it should be. This bailout will only buy us a few months. Listen to Ron Paul for some reason. look at charts of CPI, M1, M2, M3, value of dollar over time to convince yourself.

The root cause of this problem is “global free trade”. The problems on Wall Street, Main Street, and the International Banking and Investment industries can all be traced back to 16 years of “Global Free Trade” and “De-Regulation” that made International Corporations and their CEO’s and stock investors very wealthy, while they dismantled and sold off the assets of American’s home town Industries. Mean while, when “We the people” lost our good jobs, we also lost our capacity to save for the future. As the years passed, we ran down our savings and then ran up our debt as we all pretended we were not falling further and further behind as each generation came of age. To help us to maintain our collective delusion of wealth, Washington (Democrats & Republicans) used the Federal Reserve, and De-Regulation to push down interest rates, and removed restrictions on mortgages and credit card debt. By these means, they wanted to entice us to live in a fantasy of artificial wealth. They deliberately put in place, policies that would inflate home values to create artificial equity from which we could borrow even more, as we went further and further into net debt! We did not realize it, but we were “deceived” into far deeper debt! We were told “Not to worry, if you cannot afford this home in a year, you will be able to sell it for a profit”! And so without even realizing it, many were deceived into catastrophic debt from which they had no escape! While it lasted for the last 6 years, it all felt so REAL! But it was as much of a fantasy as that of the Discover Card commercial where the black and white Main Street suddenly became a color Carnival when “Discover” came to town. It was also as much of a lie, as that told by the Credit Card commercial where a young, newly married couple looks adoringly at their new credit card as she exclaims; “I finally got the CREDIT I deserve!” Yes right, “come into my parlor said the spider to the fly”! When a family is living beyond its means on debt, it will only fell good until they hit their limit! Then reality hits, when the free money stops, and the banks say “NO MORE, ITS TIME TO PAY US BACK!” Well America, that day has come for America! But now Washington says NO, lets borrow $700B from the bank across the ocean in CHINA, they can keep our national life style going! But America, mark my words; they are only buying themselves time! This is not the Bankruptcy of a person, or a family, or even a state government. No my friends, this is the bankruptcy of AMERICA! “We the people” did not do this to ourselves! Washington and its Republicans and Democrats alike did this to us! America, tell Washington, no bail out, until they replace global free trade, with global “FAIR and BALANCED” trade! And lastly my friends, when your electricity is turned off in a few months, listen to the silence! That silence will be the sound you hear when the “Sucking Sound” stops! That “Sucking Sound” is from that same vacuum that Ross Perot warned us about so many years ago. This will end when that vacuum is finally turned off! But they will not turn it off until all of our wealth is gone! Then the next sound you will hear will be weeks later, when the hungry mob comes. And hungry mob will come, and they will be intent on having you and your family, OVER FOR DINNER!