The FDIC is currently funded by a small fee charged to every bank FDIC insured account in the country. The enormous amount of bank collapses has nearly exhausted the FDIC coffers.
Call it an industry, rather than taxpayer-funded bailout.
Somehow, a NYT article this AM misses the issue. The article seems to focus on the irony of banks lending to the FDIC, but seems to forget that it is the fees on bank accounts that fund the insurance program in the first place.
But the ironic spin is besides the point — the FDIC is out of money not because it was mismanaged or made horrifically risky investments or engaged in otherwise irresponsible behavior. It is running out of cash because some of the banks it insures engaged in that behavior.
“Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.
The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.
A hallmark of the financial crisis has been the decision by successive administrations over the last year to lend hundreds of billions of taxpayer dollars to large and small banks . . .
Bankers and their lobbyists like the idea because it is more attractive than the alternatives: yet another across-the-board emergency assessment on them, or tapping an existing $100 billion credit line to the Treasury.”
Note that it is courtesy of a 1991 law passed during the S&L crisis that the FDIC is alloed to borrow from banks. The lenders would get government bonds, with interest rates set by the Treasury secretary.
At first blush, it is not a bad solution to the current problem of the ongoing collapse of too many banks.
Given that the banking industry blew up due to the irresponsible behavior of its own members, seeing some of its leaders step up to facilitate further repairs to the sector is an idea I can get behind — and is greatly preferable to yet another taxpayer funded bailout.
F.D.I.C. May Borrow Funds From Banks
NYT, September 21, 2009
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.