metreon

I noticed several people repeating what I already presented without actually commenting on the underlying issue. Aside from the common misconceptions about FDIC liability, the point is the liability limitation is several decades old and has not paced with inflation, forcing people to spread their nest egg inefficiently among several banks, creating an unnecessary pile of paper and financial confusion for virtually everone if they chose to opt for financial safety. As people get older and have accumulated more of a nest egg, this may be especially true and particularly a burden.

As mentioned before, private insurance is also available through many brokerage accounts for amounts greater than $100,000, so a brokerage account might be an option. However, it is not clear to me why such insurance is not also available through banks. Is some regulatory issue restraining this? Or is it simply that banks don't want to foot the bill and prefer simply to use the aura of "FDIC insurance" to suggest safety without actually providing it.

It is unfortunate that the run on Indymac produced many furious customers, even people fainting in line, because they, like many other people, had the mistaken notion that FDIC liability was per account rather than per customer. Many lost their life savings in that bank, beyond the covered $100,000, that is. The point I was making is the FDIC coverage limit is woefully outdated and needs to be upgraded.

If this misconception is widespread, as I suspect, then if there is a sudden realization of the truth of it by the population, then there could be lots of mini-bank runs throughout the nation as people pull excess accounts out and redistribute them.