Friday, January 8, 2010

The FDIC Rumor

As last year was coming to an end, there was a rumor going around that Bank of America was planning to drop its FDIC insurance coverage as of the beginning of 2010. This certainly would have been of great concern for BofA customers, but everyone else was supposed to notice the larger point. The email spreading this rumor read in part:


This development not only suggest that the FDIC is insolvent, it suggests that U.S. fiat money, placed in interest-bearing accounts, will soon be defaulted in bank losses or replaced. How many other banks will quickly follow?

There's a grain of truth to this, but only a grain. What Bank of America ended on January 1 was its participation in the FDIC's Transaction Account Guarantee Program, which guaranteed the money in checking accounts and other non-interest-bearing accounts, with no limit. This was a temporary program anyway, designed to help promote banking stability during the crisis and scheduled to end at the close of 2009. The FDIC still insures deposits of up to $250,000, even in checking accounts, even at Bank of America.

So the only reason to be concerned is if you're a Bank of America customer with more than $250,000 in your checking account. And if you are, I'd suggest it's time to put that money to work elsewhere anyway.

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