Candidates Propose Big Boost For Deposit Insurance

WASHINGTON (AP) - 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. Both sides also rolled out fresh advertisements tying the other to the Wall Street crisis.

Avoiding the term "bailout," the candidates said in separate statements that Congress must make another attempt to pass an economic "rescue" plan after the House defeated the Bush administration's $700 billion proposal amid widespread public disapproval of it. The 228-205 vote, with Republicans and Democrats alike dissenting, prompted the largest sell-off on Wall Street since the day after the Sept. 11, 2001, terror attacks.

"We haven't convinced people that this is a rescue effort, not just for Wall Street but for Main Street America, for working families, for small businesses, the heartland of America - all over America," McCain said on "American Morning" on CNN. "We didn't do a good enough job."

The Arizona senator said he recommended to President Bush on Tuesday morning that the Treasury's Exchange Stabilization Fund of $250 billion be used to shore up institutions, that the limit on federally insured deposits be raised to $250,000 and that the Treasury exercise its ability to buy up $1 trillion in mortgages.

In a statement earlier Tuesday, Obama said Congress should not start over as lawmakers consider their next move in the wake of the House's rejection of what he called "the economic rescue plan." Said the Illinois senator: "Given the progress we have made, I believe we are unlikely to succeed if we start from scratch or reopen negotiations about the core elements of the agreement. But in order to pass this plan, we must do more."

He said the current federal guarantee of up to $100,000 in bank deposit insurance, a limit set nearly 30 years ago, is adequate for most families but insufficient for many small businesses. Raising the limit to $250,000 "would boost small businesses, make our banking system more secure and help restore public confidence in our financial system," he said.

The presidential campaign has become entirely about the financial crisis and who can best handle an economy in peril. Iraq, foreign policy, education and health care have largely fallen to the wayside as each campaign tries to chart a course to the presidency over the next five weeks in extraordinarily choppy economic waters.

Normally, campaign strategists can forecast what the political environment will look like and what the impact of a candidate's action or response will be - and position their candidate accordingly to reap political benefits.

Not so when financial markets are involved. Their ups and downs are incredibly difficult to predict, making the fallout of each candidate's reaction to the crisis also difficult to know.

Both McCain and Obama are taking positions and making statements with every development in hopes of appearing wise come Nov. 4 - and gaining political ground now.

In that vein, Obama and the Republican National Committee rolled out fresh TV ads on the crisis.

A two-minute Obama commercial promotes his economic plan and accuses McCain of following Bush's policies. "I know that that we can steer ourselves out of this crisis," Obama says in the spot. "But not by driving down the very same path."

"Can it get any worse?" asks a new RNC commercial airing in six states. It says Obama's economic plan "will make the problem worse" with new taxes, new spending and new debt. The RNC launched its commercial in battlegrounds of Wisconsin, Michigan, Pennsylvania, Ohio and Virginia, as well as Indiana, a Republican-leaning state where Obama has been on the air for months alone and has gained ground in polls.

Options for addressing the crisis are limited.

Thus, it was of little surprise that both candidates voiced similar prescriptions on Tuesday.

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.