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Raising the Deposit-Insurance Limit: A Bad Idea Whose Time Has Come?

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Federal deposit insurance protects the savings of small depositors, but it increases the likelihood that banks will take risks they otherwise would not have. Some bankers have suggested doubling the level of coverage, from $100,000 to $200,000. While such an increase may put smaller banks on a level playing field with larger ones, it exceeds the amount necessary to protect small savers and is unfair to taxpayers.

Federal deposit insurance protects the savings of small depositors, but it increases the likelihood that banks will take risks they otherwise would not have. Some bankers have suggested doubling the level of coverage, from $100,000 to $200,000. While such an increase may put smaller banks on a level playing field with larger ones, it exceeds the amount necessary to protect small savers and is unfair to taxpayers.


Suggested citation: Thomson, James B., 2000. "Raising the Deposit-Insurance Limit: A Bad Idea Whose Time Has Come?" Federal Reserve Bank of Cleveland, Economic Commentary, 04.15.2000.

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