Business | Markets
US plans $7tr guarantee for all bank savings deposits
There are concerns that if the authorities do not act, customers with large deposits will move their cash overseas.
- By Hugo Duncan, Evening Standard
- Published: 00:20 October 12, 2008
The US government is considering a staggering $7 trillion (Dh25.74 trillion) guarantee of all savers' deposits in a desperate bid to end the crisis in the banking system.
Senior officials in Washington are discussing temporarily backing all US bank deposits if economic conditions worsen as banks buckle under the strain of nervous investors withdrawing cash.
Similar steps have already been taken by several European countries including Ireland, Germany and Denmark, while the UK government raised its guarantee on individual bank deposits from £35,000 to £50,000 (Dh325,000).
"Our European friends have done it, so there will be great pressure to follow," said William Seidman, former chairman of the Federal Deposit Insurance Corp, which already insures $5.2 trillion of US deposits.
There are concerns that if authorities do not act, customers with large deposits in US banks will move their cash overseas to countries offering more insurance.
Camden Fine, chief executive of the trade group Independent Community Bankers of America, said: "I think that lifting the cap entirely is something that may have to be done in the next few weeks."
It came as the Group of Seven richest nations met in Washington to discuss the UK's £500 billion bank bailout. Gordon Brown yesterday called on nations to follow Britain's lead and plough funds into struggling banks and offer guarantees to get banks lending to each other again.
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