For the history buffs out there, the U.S. was the first government to move to paper currency en masse and this was instrumental in our growth as a nation.

@Liz – a couple of quick points. The government has increased the money supply in response to the recession and this doesn’t really mean “printing more money” in the literal sense. What that really refers to is increasing M2 money supply which is primarily done through reducing short term lending rates from the Federal Reserve. Just as quickly as the money supply was increased, so too can the money supply be contracted (hopefully after we’re truly on firm footing economically).

As to letting the FDIC borrow money, should the FDIC not be able to continue operations, the loss of confidence from consumers would far outweigh any costs of borrowing. What’s been an interesting development is Obama’s ‘Financial Responsibility Tax’ on banks with over $50 billion in assets. It sounds great to levy taxes on these banks, but consumers ultimately pay the price. To truly get at the people responsible, it would be a far smarter endeavor to levy a tax on the individuals rather than the corporation that employed them.

- Buy reinsurance from a reinsurance company (a company who insures other comapnies’ insurance funds).

Of course they won’t do that, because (as Kevin mentioned) they are a federal agency and aren’t bound by any real financial rules and they have magical immunity to failure.

However, that *should* worry Kevin, because the way the government fixes these things is to devalue the dollars we hold by printing more.

That said, I agree this is all very unlikely, the whole point of an insurance fund is that it grows in good times and shrinks in bad times.

They’re government agencies who have access to the full resources of the state. I wouldn’t lose sleep over this, not even a little.

As citizens we need to be concerned with big picture issues like taxes and spending. But these “Agency X is going broke/facing bankruptcy” are component issues and mostly scare tactics by political interests and the media.

I’ll concede however that the fear mongering does accomplish it’s mission of getting peoples attention.

With that said, if you’re really concerned, you can always park some money in T-bills, TIPS, I Bonds, or even good old fashioned EE Bonds. These are all direct obligations of the government and you can skip the uncertainty of FDIC protection. Of course, these instruments present their own issues from zero yields to interest rate risk to early redemption penalties.

I’m with you, Nickel…not happy, but not losing sleep over it.

Before brainstorming more solutions, I would get more info about the existing ones you mention.

You say “borrowing from healthy banks reduces the amount of money available in the private sector to fund the recovery…” How much is it really reducing banks’ lending power? By 10 percent? A half a percent? Is this amount negligible?

Later you write “at the same time, levying additional fees could be push weak banks toward the edge of failure.” How big are the FDIC fees? Are they really a major factor in failing banks? Or just a contributing factor?

I’m not saying you are wrong, I’d just like a bit more info before writing these options off. Thanks!

http://www.fivecentnickel.com/.....trategies/

Stop insuring Money Market Funds, they are investments and should not be covered by FDIC.

Lower the rate covered back down to $100k.

Only insure per person per bank, not per account. People get around the ‘per account’ restriction by hoarding all their cash in multiple accounts each less than max covered rate. The intent of the insurance wasn’t to insure every damn penny.

Break up these “too big to fail” banks into smaller companies. If we recently lost 90 banks, then split the largest 3 banks back into 90 smaller banks.

Regulate the banks more — if the FDIC is insuring the banks, then the FDIC should regulate the banks harder to keep them from losing so much money.

I’m with you. Seems scary, but not enough to cause immediate panic. It helps that I don’t have any real assets, though.

I agree about the degree of concern. Unfortunately, as of right now, there are bigger problems. However, a problem like this has a real chance of hurting us if it gets to another level.

The only reason I do not worry is because I put my trust in my higher power… otherwise I may have a very valuable mattress! Well – once I pay off my debt that is.