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Deposit insurance rules complicated

August 03, 2008

No depositor should lose any money for a deposit of more than $100,000. ("FDIC limits make sense in principle," Market Beat, July 26.)

The rules are very complicated. The FDIC coverage rules are not mentioned, much less explained, when you open or add to an account that may put you at risk. Banks only care about maximizing deposits. They have a direct financial interest in preventing you from spreading your deposits over more than one bank to maintain FDIC protection.

As long as the financial lobby controls our banking laws, we will continue to see such behavior rewarded and the bank failure cycle repeated with innocent depositors and taxpayers being fleeced by the robber-barons of Wall Street.

Mark O'Connell

Irvine

While I agree that the FDIC should remove any limits on insurance coverage amounts, the thinking that these limits will cause a run on money is somewhat flawed.

Many depositors will withdraw funds in excess of FDIC insured limits. However they will redeposit them into other financial institutions, within the FDIC limits, resulting in a redistribution of assets among the banks. This will ultimately result in most deposits being fully covered.

That being the case, the concept that the FDIC maintains these limits due to moral hazard for banking institutions becomes no longer applicable. The FDIC should cease to put a limit on insured deposits.

Robert Anton

Simi Valley

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