A little-mentioned portion of the Bailout Bill that has dire consequences is the increasing of Federal Deposit Insurance to $250,000. Thomas DiLorenzo over at The Lew Rockwell Blog says it better than I can.
He ties it back to the S&L crisis of the 1980’s and previous increases of the FDIC limit:
Bankers looked at this and thought, well now, I can make big, big bucks by taking on far more risk with my loans (which pay higher interest), and if the loans go into default, why, I’m covered for more than twice the amount of government insurance.
They did indeed take on much more risk; thousands of their big real estate development loans defaulted; and it ended up costing taxpayers half a trillion dollars.
Brilliant move there, guys. Really brilliant.
Funny, I just passed over the limit as a “make the public feel better about banks” idea. Very interesting
/me beats head against desk
I’m writing in Ron Paul. I’ve decided.
Here in Georgia, only “approved” write-ins are actually counted. The rest are tossed. I doubt Ron Paul is on the approved list. I think I like Bob Barr enough to vote for him at this point. I know he hasn’t got a snowball’s chance, but it’ll make me feel better to know I voted for a Constitution-upholding, freedom-loving politician as opposed to the Socialist or the Fascist.
OK, enough cheap shots at the bailout/rescue bill and the people that did/did not vote for it. What is done is done and to continue to cry over spilled milk won’t get us anywhere. Everyone clearly knows your position on the bill but what constructive ideas do you have that would have been a viable alternative to the bill? (Hint: “Do nothing” is not a good response unless you have backup arguments for that policy.)
Wait, I don’t understand what FDIC has to do with loans. Doesn’t FDIC only insure deposit accounts? Also, it’s been 100k since I was a kid. Surely inflation should dictate that it be raised occasionally.
Well, the way I understand it is that the more the FDIC insures, the more of YOUR deposited money the banks can invest or loan out to other banks without fear because if they lose it, it’s federally insured. The problem with banks right now is a liquidity problem. This will not encourage them to have more liquid cash on hand. It does the opposite.
I really don’t think the administration has a clue what to do. They’re scared and stabbing in the dark.
Interesting read Chris.
Vote Obama!!!!