Deposit insurance hike eyed, NAFCU urges parity

Oct. 1, 2008 – NAFCU on Tuesday urged lawmakers to ensure parity for the National Credit Union Share Insurance Fund in connection with any move to raise the $100,000 general coverage limit in place at FDIC.

FDIC Chairman Sheila Bair is suggesting that Congress temporarily raise the general $100,000 federal deposit insurance limit in response to the current lag in confidence that has contributed to two large bank failures.

NAFCU President Fred Becker said if such an increase is implemented, the same increase should be made for coverage limits of the NCUSIF.

Becker, writing to the chairmen and ranking members of the House Financial Services Committee and Senate Banking Committee, and House and Senate leaders, said an insurance limit increase would be an important step in a larger economic stabilization plan. “NAFCU believes, however, that in this time of uncertainty, it is imperative that any increase in deposit insurance be done across the board for both the FDIC and the NCUSIF,” he stated.

NAFCU has long worked to ensure parity between the NCUSIF and FDIC to ensure that credit union members enjoy the same level of federal protection of their funds that bank customers do.

NCUA supported a share and deposit insurance limit increase as well. “Increasing federal insurance coverage for credit union members would send an important signal of reassurance at a time when confidence in depository institutions generally has been compromised by market events,” agency Chairman Michael Fryzel said.

Bair’s request for a higher FDIC insurance limit was reported by The Washington Post and elsewhere on Tuesday. “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,” she stated.

The two presidential candidates, Sens. John McCain, R-Ariz., and Barack Obama, D-Ill., were suggesting a federal deposit insurance limit increase to $250,000 during discussions about the proposed market rescue bill prior to Monday’s House vote rejecting that package.