House votes to raise ceiling on bank deposit insurance
WASHINGTON — The House overwhelmingly approved a measure Wednesday raising the $100,000 ceiling on federal bank deposit insurance to $130,000, and to double that amount for retirement accounts.
The vote was 413-10 for legislation that would raise maximum insurance coverage for deposits for the first time since 1980, when it was $40,000 per account. Retirement accounts such as IRAs and 401(k) plans would be insured up to $260,000. Proponents say the move is needed to keep pace with inflation and encourage more people to save. With inflation, $40,000 in 1980 would be worth nearly $94,000 today.
Republicans have pushed the bill through the House before, only to see it die in the Senate, where memories linger of taxpayers having to fork over $132 billion for the savings and loan bailout of the late 1980s and early 1990s.
The banking industry has lobbied for an increase in the program established during the Depression. Smaller community banks, especially, believe it would help them compete for deposits with bigger institutions.
“The savings of Americans should not be allowed to go unprotected,” Rep. Pete Sessions, R-Texas, said on the House floor before the vote.
Critics, including Federal Reserve Chairman Alan Greenspan, complain that to protect the wealthy, a burden potentially bigger than that of the thrift bailout would be imposed on taxpayers.
The fact that Greenspan and other federal bank regulators oppose the insurance increase “is a very powerful message,” said Rep. Carolyn Maloney, D-N.Y. Furthermore, she maintained, with an estimated 2 percent of bank accounts exceeding $100,000, the change would benefit few depositors.
The legislation also would combine the federal bank insurance fund with the fund for savings and loans, with a view to creating a single, more diverse fund that would be less vulnerable to regional economic problems. The bill also would make changes in the way the Federal Deposit Insurance Corp. collects premiums from banks and thrifts.