best bank rates

On Tuesday both the House and the Senate passed an amended version of Bill S.896 which includes a provision to extend the temporary increase in deposit insurance from December 31, 2009 to December 31, 2013. This applies to both FDIC and NCUA. You may not hear much about this provision in the media since it's just a tiny part of the bill which primarily deals with mortgage foreclosure prevention and enhancement in mortgage credit availability. The bill passed easily in both the House and Senate, so it appears very likely that it should soon be signed by the President and become law. More information on this bill is available at the Thomas Database page.

This news article also has a good summary of this bill including the deposit insurance provision. In addition to the deposit insurance, the bill also would increase the borrowing authority of both the FDIC and NCUA. This gives the agencies more time to rebuild deposit-insurance funds and provide more flexibility in setting assessments. There's also a provision that should make it easier on the credit unions as the NCUA deals with the losses related to the corporate credit unions.

For the deposit insurance, it's not the permanent increase that many had wanted, but at least it adds another 4 years to the current $250,000 basic coverage. Unfortunately, new 5-year CDs will go into 2014 which will extend past the temporary increase. It's quite possible that it could be extended again, but no one knows for sure.

Once it becomes law, the FDIC and NCUA should provide the official details. It should be basically the same as we have now except that the higher coverage limit won't end until 12/31/2013. So with $250K as the basic coverage limit, joint accounts will be covered up to $500K. Also, extra coverage can still be available through revocable trusts.

The insurance limit change started in late September and early October 2008 after the first bailout bill failed to pass the House. A new version of the bill was written, and it included a temporary increase to the basic FDIC and NCUA deposit insurance from $100,000 to $250,000. This revised bailout bill passed Congress and was signed by President Bush on October 3, 2008. The deposit increase was scheduled to end on December 31, 2009.

Before this $250K coverage took effect, it was possible to extend insurance coverage way above $100K through revocable trust accounts. However, it's not as straightforward as staying under the basic limit. There's always the worry that a FDIC claims agent will find something wrong with how the revocable trusts are done which would reduce the coverage. When you're under the basic limit (currently $250K), there's much less doubt. To review some of these issues, refer to my post on extending FDIC/NCUA coverage.