Who will raising FDIC limits help?

UPDATE, below

The part of the new bailout bill that’s supposed to bring along the most formerly reluctant House members is to raise the coverage limit for Federal Deposit Insurance Corporation (FDIC) insured personal deposits (which includes savings and checking accounts, cds and money market accounts) from the current level of $100,000 to $250,000. Obama, McCain and the FDIC all approve. See this story, for instance. But who does this really affect? Using data from the 2004 Survey of Consumer Finances (the 2007 numbers aren’t yet available) and adding all covered accounts within households (note that this overstates coverage, since the insurance covers accounts not households) produces this table:

Number of Households Percentage of all Households
Less than $100,000 106,433,692 94.9%
Between $100,000 and $250,000 3,976,714 3.5%
More than $250,000 1,698,530 1.5%

That’s right, this plan will help to insure that 3.5% of households with deposits over $100,000, but not the 1.5% with deposits over $250,000. I guess they’re on their own. Actually, most people in both of these categories already keep multiple accounts, to stay under the insured limit, so it will help not that much. However, it does make it look like a “compromise was reached on an improved bill,” allowing representatives to say that they held out for their constituents while they’re campaigning over the next month.

You don’t suppose that’s the point, do you?

UPDATE:

meanwhile, FDIC is doing a fine job slowing down lending.

One comment

  • Ignoring the multiple accounts aspect, it does offer some added insurance to the top 1.5% since it insures that portion of their accounts that fall in the range between 100K and 250K. So give the plan its due: it helps insure a full 5% (!) of all households, even if it doesn’t insure the fullness of their accounts. (Ignoring, as you point out, the overstatement issue of households vs. accounts.)