# Is it time to increase FDIC coverage above $100k? **URL:** \ **Category:** Great Debates\ **Created:** [September 29, 2008, 3:29pm UTC](https://boards.straightdope.com/t/is-it-time-to-increase-fdic-coverage-above-100k/465720 "2008-09-29T15:29:00Z")\ **Posts on this page:** 4\ **Page:** 2
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 30, 2008, 3:13pm UTC](https://boards.straightdope.com/t/is-it-time-to-increase-fdic-coverage-above-100k/465720/21 "2008-09-30T15:13:02Z")
It said on TV that you can have multiple 100 k accounts at the same bank with varying the type and names on the account. One for wife, one for kids ,one for you ,joint etc. A little inconvenient but doable. ---
**Author:** ![R.P.McMurphy](https://avatars.discourse-cdn.com/v4/letter/r/7993a0/32.png) [@R.P.McMurphy](https://boards.straightdope.com/u/R.P.McMurphy)\ **Post date:** [September 30, 2008, 3:58pm UTC](https://boards.straightdope.com/t/is-it-time-to-increase-fdic-coverage-above-100k/465720/22 "2008-09-30T15:58:31Z")
> [@brickbacon](#): > > But in your analogy, the bank would be the casino. The casino has no incentive to stop a gambler so long as they are making money. Say those account holders were insured up to $1 million. Why would the bank have not made all these bad loans? > > I don’t buy the notion that if people had more protection they would suddenly park all their money at the local bank. Even if they did, that doesn’t stop the bank from loaning to under-qualified people. In fact, it just gives them more money to loan to people. > > Exactly. Unless I’m missing some part of this, insuring people wouldn’t have diminished the greed that led to all this at all. No, in my analogy the casino is the overall financial markets. For the sake of an image, the banks are your two smart sons and your one idiot son (and you’re not absolutely sure which one’s the idiot) who like to gamble. The Fed is you, who has agreed to cover your sons’ gambling debts up to a set amount. You collect a fee up front from them to provide that service. If you send them into the casino with less money, stricter controls and you hold back a greater portion of their nut then you are limiting your exposure and the likelihood that you can’t cover their debts is diminished. Say their income is fairly fixed. You can afford to cover a loss by the idiot to a greater amount if your increase your fees to all of them. This is probably clear as mud but that’s the best I can do right now. ---
**Author:** ![brickbacon](https://avatars.discourse-cdn.com/v4/letter/b/898d66/32.png) [@brickbacon](https://boards.straightdope.com/u/brickbacon)\ **Post date:** [September 30, 2008, 5:35pm UTC](https://boards.straightdope.com/t/is-it-time-to-increase-fdic-coverage-above-100k/465720/23 "2008-09-30T17:35:40Z")
> [@Spartydog](#): > > No, in my analogy the casino is the overall financial markets. For the sake of an image, the banks are your two smart sons and your one idiot son (and you’re not absolutely sure which one’s the idiot) who like to gamble. The Fed is you, who has agreed to cover your sons’ gambling debts up to a set amount. The FED is not covering just the banks, they are covering the customers via the bank. Raising the limit only helps the banks in the sense that consumers are less likely to remove money from the bank AFTER the shit has hit the fan. There less chance of a run on the bank when normal folks know their money is protected by the government. However, that wouldn’t have prevented the initial crisis. You keep ignoring my initial question, why would any of that have prevented banks from issuing these mortgages in the first place. I have no problem with raising the FDIC limit, but I don’t see how that would have prevented this clusterfuck. > [@Spartydog](#): > > You collect a fee up front from them to provide that service. If you send them into the casino with less money, stricter controls and you hold back a greater portion of their nut then you are limiting your exposure and the likelihood that you can’t cover their debts is diminished. Say their income is fairly fixed. You can afford to cover a loss by the idiot to a greater amount if your increase your fees to all of them. I get your analogy, and I appreciate you working with me on this. Even limiting the money the son could lose in the casino doesn’t solve the problem. In your analogy, the son would be bet on say 5 football games. Then before the outcome was determined, he’d sell his betting slips to someone else for a slight profit based on an expected, but unrealized, return. Thus, he’d get all his money back to gamble again. Rinse and repeat. How would that have changed just because you limit what he can gamble at any one time? sure, it may help, but it doesn’t address the underlying issue. ---
**Author:** ![R.P.McMurphy](https://avatars.discourse-cdn.com/v4/letter/r/7993a0/32.png) [@R.P.McMurphy](https://boards.straightdope.com/u/R.P.McMurphy)\ **Post date:** [September 30, 2008, 8:34pm UTC](https://boards.straightdope.com/t/is-it-time-to-increase-fdic-coverage-above-100k/465720/24 "2008-09-30T20:34:34Z")
> [@brickbacon](#): > > The FED is not covering just the banks, they are covering the customers via the bank. Raising the limit only helps the banks in the sense that consumers are less likely to remove money from the bank AFTER the shit has hit the fan. There less chance of a run on the bank when normal folks know their money is protected by the government. However, that wouldn’t have prevented the initial crisis. You keep ignoring my initial question, why would any of that have prevented banks from issuing these mortgages in the first place. I have no problem with raising the FDIC limit, but I don’t see how that would have prevented this clusterfuck. > > I get your analogy, and I appreciate you working with me on this. Even limiting the money the son could lose in the casino doesn’t solve the problem. In your analogy, the son would be bet on say 5 football games. Then before the outcome was determined, he’d sell his betting slips to someone else for a slight profit based on an expected, but unrealized, return. Thus, he’d get all his money back to gamble again. Rinse and repeat. How would that have changed just because you limit what he can gamble at any one time? sure, it may help, but it doesn’t address the underlying issue. Maybe where we’re misunderstanding each other is that I’m not saying that it would have prevented the problem. What I’m saying is that it might have lessened the magnitude of the problem and made it easier to manage. Note that I use the word “might”. I am theorizing. Preventing banks from making so many bad loans is a regulatory function that should have been in place long ago. To use the casino analogy, that’s why the house has limits on many bets. In case they are on the wrong side of a bet they don’t get wiped out. All I’m saying in regard to the FDIC limits is that possibly with a higher limit the run on the deposits in the bank would be less. It would make it easier for the bank and the FDIC to work through the crisis. When people hear a bank is in trouble they start drawing down to the FDIC limit. The lower the limit the less cash the bank is left to work with. Don’t get the idea that I’m saying the FDIC limits caused the problem. I’m just saying the maybe the limits are artificially low in the current economy and it has worsened the crisis. [Previous page](https://boards.straightdope.com/t/is-it-time-to-increase-fdic-coverage-above-100k/465720.md?page=1)