FDIC (The Agency That Insures Your Bank Account) Being Phased Out


There’s been a lot of talk from government officials, attempting to prevent panic and a run on banks, assuring us not to worry, that our bank deposits are insured by the FDIC up to $100,000.  What no one has discussed is the fact that the FDIC is slowly being phased out by inflation.  Did you know that the $100,000 limit on insured savings has been in place for 28 years?  It was last increased in 1980, from $40,000 to $100,000. 

Depository Institutions Deregulation and Monetary Control Act of 1980
This act, which is passed as a response by Congress to get S&Ls out of interest- rate mismatch, is an effort to deregulate S&Ls.

This act:

  • Increases THE FDIC deposit insurance coverage from $40,000 to $100,000.

Since 1980, the CPI (consumer price index) has risen by 257%.  Therefore, the value of deposits insured by the FDIC has declined by 257% since 1980.  If this isn’t a gradual phase-out of the program, I don’t know what is.

Also, did you know that the FDIC only had about $52 billion in assets at the beginning of this year?  How many bank failures would it take to wipe out that fund?  Very few.  Then what?  Then taxpayers are on the hook – you and I.  The government will simply pick up the tab and add it to the national debt for our kids and grandkids to pay.

4 Responses to FDIC (The Agency That Insures Your Bank Account) Being Phased Out

  1. And Pete, who backs up the FDIC? Where does the money come from to repay all the losses? Hello 1929, riots at the bank.

  2. Pete Murphy says:

    Wow, Mike, you really pounced on this one! I only had it published for less than 60 seconds when I edited it and added another paragraph at the end, where you’ll find the answer. (I know you already knew the answer and your question was rhetorical, for the benefit of other readers.)

  3. FJ says:

    $52billion – wow – haven’t they already printed that much in funny-money to bail out the mortgage lenders? This’ll be interesting.

    Thanks for the response to my previous comment re: S&L 1990 vs. today.

  4. […] out by inflation, but also observed that the FDIC itself was threatened with bankruptcy.  (See FDIC – The Agency That Insures Your Bank Account – Being Phased Out.)  Well, folks, it’s here.  It’s now clear that the FDIC has nowhere near the funds […]

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