FDIC and 2013

As of January 2013 the FDIC stops offering 100% coverage for all insured deposits. That amounts to $1.6 trillion in deposits, 85-90% deposited with the TBTF mega banks. Once the insurance ramps back to $250,000 the FDIC risk amelioration offered to large depositors will cause them to flee from the insecurity of the much reduced FDIC coverage. This money will rotate immediately into short term Treasury securities. The treasury, in order to handle this flood of money, will immediately offer negative interest rates. This financing will resemble the .5% negative interest rate offered by the Swiss and Germans on the funds flooding to their banks from Spain, Greece and Italy.

This will be a bank run much larger than the Euro banks flight to safety.
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The Transaction Account Guarantee program was implemented in 2008 and provides unlimited FDIC insurance to deposits for all non-interest-bearing transaction accounts above the limit of $250,000. Today, more than $1.3 trillion in deposits are covered by the program.

As a part of the Dodd-Frank Act, TAG initially was to be phased out at the end of 2012, however, now there is a lobbying push in Congress to keep the program permanent, by way of a stealth amendment.
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The average amount of money in a TAG account is around $2 million, the Wall Street Journal reports, and most of the money in these accounts is from the five largest national banks.

Financial blog ZeroHedge points out, “According to the FDIC, non-interest bearing deposits for the top five banks have swelled enormously, by over 100%, since 2008 when the FDIC put in place the emergency deposit insurance program known as TAG.”
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