savings

The FDIC deals with mounting bank failures

The FDIC reviews premium assessments quarterly and, to meet the increase in anticipated costs, it recently raised the premiums it assesses member banks and imposed a one-time special assessment of 20 cents on every $100 of deposits.

Community banks fired up

The assessment has infuriated community bankers. Camden Fine, president of the Independent Community Bankers of America, says the 20-cent assessment will cripple the nation's 8,000 community banks. In an open letter to the industry, Fine claims community banks have played by the rules, and now will pay to bail out firms that did not.

"The very banks that are capable of dragging this country out of our economic turmoil, the banks that are doing all they can to give Main Street and rural America a hand up, got the back of their hand from their own government on the same day that Citi was getting a handout," wrote Fine.

In a letter to Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, FDIC chairman Sheila Bair wrote that the increased assessments are necessary because the agency's current authority "provides a thin margin of error."

Bair also wants Congress to pass the Depositor Protection Act of 2009, which will increase the FDIC's borrowing authority to $100 billion. Additionally, it would temporarily authorize borrowing up to $500 billion during the current crisis. Bair says that if the borrowing authority is increased, the agency may be able to reduce the assessment.

In a related move, Rep. Barney Frank, D-Mass., has sponsored legislation permanently increasing deposit insurance coverage to $250,000 on non-retirement accounts.* Congress raised the FDIC insurance limit to $250,000 from $100,000 last October to give consumers more confidence in the banking system. The limit was due to revert to $100,000 Dec. 31, 2009. The $100,000 cap has been in effect since 1980 and has lagged inflation. The Bureau of Labor Statistics' inflation calculator shows that $100,000 in 1980 dollars equals $256,241 today.

Make sure that the money you have in a bank is fully covered by FDIC insurance.

*Retirement accounts at banks and savings institutions have received deposit insurance protection up to $250,000 since April 1, 2006.

Read more about the FDIC in this Special section.

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