Among the gimmicks under discussion to try to have the government (read taxpayers) bail out the bankrupt trans-Atlantic financial system, is to allow the FDIC to cover all deposits in the banking system, and not just deposits up to $250,000, as is now the law. This is being widely discussed in the desperate banking community and among members of Congress in Washington. Yesterday’s New York Times reported that “some members of Congress are looking for ways to boost that cap, at least temporarily, in order to stop depositors from pulling their money out of smaller institutions that have been at center of recent bank runs. Rep. Ro Khanna (D-CA) and other lawmakers are in talks about introducing bipartisan legislation as early as this week that would temporarily increase the deposit cap on transaction accounts.”
Sen. Elizabeth Warren (D-MA) reportedly favors the infinity option—i.e., a total bailout. The New York Times added: “Others, including Senator Elizabeth Warren, Democrat of Massachusetts, have suggested lifting the deposit cap altogether.” This is the precise inverse of Glass-Steagall.
