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US FDIC Chairwoman Sheila C. Bair’s solution to AMERICA’S MONEY CRISIS

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 1, 2008

Knew this would happen. The FDIC may require more reserves from banks, but if the Fed decreases rates then it will be easier for banks to borrow to meet the requirement. Just forces rich people to spread amounts over many banks so in long run banks have the same amount of money insured. It does cause short term havoc with bank and big depositors move their money around until they pick up investors from other banks doing the same thing.

The Federal Deposit Insurance Corp. wants Congress to increase temporarily the $100,000 ceiling on bank deposits guaranteed by the government. The move is designed to ease pressure on banks after two of the country’s largest institutions were forced from business in the last week as customers started to withdraw money from their accounts.

“Unfortunately, there is an increasing crisis of confidence that is feeding unnecessary fear in the marketplace,” FDIC Chairman Sheila Bair said in a statement. “To address this crisis of confidence, I do believe that it would be helpful for the FDIC to have the temporary ability to raise deposit insurance limits. As always, any potential borrowings from Treasury to support this additional coverage would need to be paid back through the FDIC’s primary funding source — industry assessments,”

Federal Deposit Insurance Corp. Chairwoman Sheila Bair on Tuesday asked for unspecified authority to raise insurance limits on the very day that both presidential candidates recommended the move as a way to help prospects for the failed $700 billion financial bailout bill. Sens. John McCain and Barack Obama pushed the idea of an increase in the insurance limit to $250,000.

While the FDIC has not said what the new ceiling should be, Sens. John McCain and Barack Obama have both expressed support for a ceiling of $250,000, backing a proposal currently being molded by Congress.

Any increase in the ceiling would require an expansion of the FDIC’s insurance fund. The fund is replenished by an assessment on the banking industry, not taxpayers, but higher assessments would limit the amount of money banks have available to make loans.

The value of the FDIC insurance today is only about a quarter to half of its value when the FDIC was set up. Raising it to $500,000 is the only honest way to go. It would just reestablish the scheme to the value it had during the “first” depression…today’s depression is only pending.

I just realized today. That anyone with over 100k in a bank, will be withdrawing it. This will create silent runs on deposits.The FDIC needs this increase, or it will face many foreclosed banks from silent runs on deposits. So, Banks will rely on deposits, and you know what ? If people pull their deposit accounts fearing that 100k coverage isn’t enough for their 230k ?

What about those of us that don’t have $100K+???
With no credit ?

Sheila C. Bair Profile:

Sheila C. Bair was sworn in as the 19th Chairman of the Federal Deposit Insurance Corporation (FDIC) on June 26, 2006. She was appointed Chairman for a five-year term, and as a member of the FDIC Board of Directors through July 2013.

Before her appointment to the FDIC, Ms. Bair was the Dean’s Professor of Financial Regulatory Policy for the Isenberg School of Management at the University of Massachusetts-Amherst since 2002. Other career experience includes serving as Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury (2001 to 2002), Senior Vice President for Government Relations of the New York Stock Exchange (1995 to 2000), a Commissioner and Acting Chairman of the Commodity Futures Trading Commission (1991 to 1995), and Research Director, Deputy Counsel and Counsel to Senate Majority Leader Robert Dole (1981 to 1988). While an academic, Chairman Bair also served on the FDIC’s Advisory Committee on Banking Policy.

Chairman Bair’s prior work focused heavily on the banking sector. As the Assistant Treasury Secretary for Financial Institutions, she was charged with helping to develop the Administration’s positions on banking policy issues. She worked closely with Treasury’s own banking regulatory bureaus, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, as well as the Federal Reserve Board and the FDIC. Ms. Bair’s teaching and research at the University of Massachusetts also dealt extensively with banking and related issues.

Ms. Bair has served as a member of several professional and nonprofit organizations, including the Insurance Marketplace Standards Association, Women in Housing and Finance, Center for Responsible Lending, NASD Ahead-of-the-Curve Advisory Committee, Massachusetts Savings Makes Cents, American Bar Association, Exchequer Club, and Society of Children’s Book Writers and Illustrators.

Five months after becoming Chairman, Ms. Bair was named to The Wall Street Journal magazine Smart Money’s (November 2006) “Power 30” list – the magazine’s lineup of the 30 most influential people in investing. Chairman Bair has also received several honors for her published work on financial issues, including her educational writings on money and finance for children, and for professional achievement. Among the honors she has received are: Distinguished Achievement Award, Association of Education Publishers (2005); Personal Service Feature of the Year, and Author of the Month Awards, Highlights Magazine for Children (2002, 2003 and 2004); and The Treasury Medal (2002). Her first book – Rock, Brock and the Savings Shock, a publication for children – was published in 2006.

Chairman Bair received a bachelor’s degree from Kansas University and a J.D. from Kansas University School of Law. She is married to Scott P. Cooper and has two children.

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