Republican John McCain and Democrat Barack Obama proposed that the government insure consumers' bank deposits up to $250,000 by raising the $100,000 federal limit as each sought to navigate the unpredictable politics of the financial crisis.

I’m curious, where do you think the money for this will come from?

Taking into consideration that the FDIC is already under a strain from the recent string of bank failures, and it will take time for the FDIC to build up some reserves to back a new $250,000 limit. Those additional reserves will have to come from additional insurance premiums paid by banks, many of which are already in financial trouble.  So in the meantime, taxpayers will be on the hook for the additional insurance.

The Federal Deposit Insurance Corp., an independent federal agency created in 1933, insures deposits in banks and thrift institutions for at least $100,000. Premiums paid by member institutions and investment earnings in Treasury securities fund the agency, which has an insurance fund of more than $49 billion, according to its Web site.

The FDIC says it insures more than $3 trillion in deposits and already provides up to $250,000 in insurance for retirement accounts such as individual retirement accounts and Keoghs. A five-person bipartisan board of directors appointed by the president manages the agency.

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