Feds Consider Insuring All Bank Deposits

By Clay Dillow, Newser Staff

Posted Oct 10, 2008 4:39 PM CDT

(Newser) – Under the shadow of the deteriorating global economy, the US is considering two more steps to assuage markets, the Wall Street Journal reports: guaranteeing billions in bank debt and insuring all US bank deposits. Either move is an aggressive step, and in tandem they would mark Wasington's largest intervention yet into the financial markets.

The G-7 meets today in Washington to discuss the British plan to insure $432 billion in bank debt, a plan the Brits would like to see expanded to other countries. In just one kind of US bank debt, $99 billion will come due by the end of the year. The FDIC has $45 billion in reserves to back $5.2 trillion in bank deposits, but raising the cap would expose it to an additional $1.8 trillion.

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Britain's Chancellor of the Exchequer Alistair Darling, right, is trying to calm international markets by convincing the G-7 to adopt the UK's strategy of insuring bank debt. (AP Photo/Lefteris Pitarakis)

U.S. Treasury Secretary Henry Paulson pauses during a news conference at the Treasury Department on Wednesday, Oct. 8, 2008 in Washington. (AP Photo/Evan Vucci)

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The interdependence of the major global financial markets has been established beyond the slightest doubt. As a consequence, it is essential that the major countries act collectively and cooperatively.
- H. Rodgin Cohen, chairman of law firm Sullivan & Cromwell

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