Tuesday, September 22, 2009

Banks Bailing Out FDIC In Lieu Of Treasury

The New York Times is reporting, "F.D.I.C. May Borrow Funds From Banks" By Stephen Labaton, September 21, 2009. From the article:
Tired of the government bailing out banks? Get ready for this: officials may soon ask banks to bail out the government.

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.
Read the complete article here.

The FDIC is short of funds from a wave of bank failures. It has a $100 billion unused credit line with the Treasury Department, but Shelia Bair, FDIC Chairperson, is looking for alternatives. She can assess banks but is reluctant to raise their premiums as much as needed in these tough economic times.

As a note, the FDIC insurance fund is not backed by the full faith and credit of the US. See my earlier post, "FDIC Insurance Fund Is Not Backed By US Full Faith And Credit."

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