is the FDIC running out of money? If you’ve been following the financial news over the past day or so, you’re likely aware that the FDIC insurance fund is running low. In fact, the FDIC has seized 94 failing banks during 2009, driving the insurance fund to its lowest level since the peak of the Savings & Loan scandal in 1992. Here’s the scary thing… The FDIC currently insures roughly $4.8 trillion in deposits, but they only have about $10 billion on hand (down from roughly $30 billion at the beginning of the year). In other words, the fund could easily be wiped out by the failure of just one major bank. Covering the shortfall The FDIC is funded by premiums from member banks, but these premiums haven’t been able to keep up with the FDIC’s recent “burn rate.” The FDIC is thus considering at least four different options for shoring up the insurance fund. Borrowing from healthy banks. Levying a special fee on banks. Borrowing from the Treasury. Collecting regular premiums early. Unfortunately, none of these options are particularly attractive. Borrowing from healthy banks reduces the amount of money available in the private sector to fund the recovery, whereas borrowing from the Treasury is politically objectionable. At the same time, levying additional fees could be push weak banks toward the edge of failure. According to an article in the Wall Street Journal, the FDIC is currently leaning toward the final option. Unfortunately, that is a temporary solution, as they’re essentially cannibalizing future premiums. I'm not Anti-FED... I'm just very Pro-Barry and tend to distrust those who tell me not to worry because they have my best interest in mind. (Message edited by barry on January 17, 2010) (Message edited by barry on January 17, 2010)
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