Obama Makes a Smart (Unnoticed?) Move

Amid all the bad news that keeps getting sloshed around, a couple of days ago there was a VERY important bright spot that went largely unnoticed. For those of you who believe that President Obama is the second coming of Jesus, his pedestal just got a little higher. For those of you who think he's Satan's spawn, this is a classic "blind squirrel finding a nut" moment. For the rest of us, it's just one more piece of a large effort to ensure the stability of our banking system.

In October of last year, President Bush increased insurance coverage per individual from $100,000 to $250,000. This was done, essentially, to prevent a sweeping run on all banks. It was a brilliant move to build confidence that really cost taxpayers nothing (so far).

On May 20th, 2009 President Obama signed into law a continuation of the enormous increase in FDIC coverage. This additional coverage was set to expire on December 31 of this year. The new law extends the coverage through the end of 2013.

Here at my bank, we had already fielded several calls from concerned CD customers about this potential loss of coverage. One man went so far as to request something in writing from me stating that he would be allowed to pull his money if the coverage reversed back to $100,000, and we had done nothing to otherwise insure his funds. We were already developing a game plan to combat a run on our tiny little bank if the coverage had reverted. Depositors would have taken money out in droves to accommodate for the reversal of insurance. This could have been very bad not only for us, but for the system in general. We might have had a situation similar to the one I've discussed in a related blog post below.

So this is your good news headline of the day: "President Obama Averts Potential Run on the American Banking System, Seven Months in Advance"

Kudos Obama.

For more information on the extension, please see the following website:

http://www.fdic.gov/deposit/deposits/changes.html