Obama To The Limit

Come...on...FDIC, now come on FDIC!(h/t AmericaBlog)

Today, Obama announced his support for increasing the FDIC limit to $250,000. This makes a lot of sense and shows that Obama gets it. People of all ages are worried about what is happening with their bank accounts and the old amount is not enough to provide confidence.

This is a good idea if you believe consumer confidence in preventing retail bank runs now is more important than taxpayers being on the hook for the already dwindling FDIC deposit insurance fund later. Retail bank runs are what killed IndyMac and WaMu.

Unfortunately, the real bank runs are already taking place beneath the surface. Foreign banks are taking their funds out of US banks in order to limit exposure. That is a far more fatal blow to the balance sheets of banks than consumers removing deposits.

While this is a good second or third move for Obama to call for, priority #1 is to unlock the credit mess. I'm beginning to think only a massive, coordinated emergency rate cut worldwide will do it. After that, a number of additional actions will have to be taken. But Obama's at least pointing in the right direction on this.