A local bank president is lobbying for a bill to increase the amount of savings deposit insurance.
The Federal Deposit Insurance Reform Act of 2002, HR 3717, is in the Senate Committee on Banking, Housing and Urban Affairs. The bill passed the House on May 22 by a vote of 408-18.
Jack Crombie, president and chief executive officer of Citizens Bank of Nevada County, joined other bankers last month in support of the bill. Crombie met with Sen. Dianne Feinstein, with an aide to Sen. Barbara Boxer, and with two out-of-state legislators.
Among its provisions, the bill proposes to increase the limits on insured deposits from $100,000 to $130,000 - the first increase since 1980. It also provides an inflation adjustment and doubles the amount of deposit insurance for certain retirement accounts.
Crombie said the increase in deposit insurance is needed because people keep accounts in more than one bank to make sure all the money in their savings is insured.
The increase would help small banks like Crombie's institution by raising the amount of insured funds.
"I think it will help community banks in that people who do run around to different banks to get full coverage won't have to do that," he said.
The increase in deposit insurance is being opposed by large banks, said Craig Hudson, executive director of California Independent Bankers, a Newport Beach-based organization.
The major banks figure they're too big to fail, and don't want higher insurance premiums, said Hudson.
There are a surprising number of households with enough money to worry about the deposit insurance.
In Nevada County, an influx of retirees with money from home sales could make this area one with a relatively high concentration of large depositors.
The stock market decline has caused people to pull out of the market in the last few years and invest in federally insured bank deposits, Crombie said.
A 2001 Gallup survey commissioned by the Federal Deposit Insurance Corp. found that one in eight households keep more than $100,000 in the bank. And a third of all households reported having more than $100,000 in the bank at one time or another.
These large depositors keep money at more than one bank and manage accounts to keep them under $100,000 so they remain insured.
The Gallup survey found that the public would like to see deposit insurance levels keep pace with inflation. But people were split over whether to increase the limits.