You, Me, and the FDIC

[speech]

The acronym FDIC stands for Federal Deposit Insurance Corporation. It is better understood as the Federal Deception Illusion Corporation.

Its goal since its founding in 1934 has been to create public deception regarding the looming insolvency of individual banks. In the name of protecting depositors, it protects bankers.

It has done its job very well. But now it is in trouble. Therefore, so are bankers.

There is serious speculation in the mainstream press that the FDIC will run out of funds to repay depositors in failed banks. It may have to borrow money from the U.S. Treasury to keep from going under.

This has happened before. In the 1990–91 recession, the FDIC had to borrow from the Treasury in order to maintain its program. It borrowed about $15 billion. The FDIC repaid the Treasury the next year.
http://waronyou.com/forums/index.php?topic=831.0

[josephadel_3]

If the dollar collapses, don't count on getting your money out of the bank. We're all screwed, myself included.

[Zippyjuan]

Let's look at some math. They currently have 117 banks on their watch list- including the ten which have already failed this year. They say the total assets of all of the banks on the list are $78 billion- of which $32 billion was in IndyMac. http://money.cnn.com/2008/08/26/news/economy/fdic_banks/index.htm That leaves $46 billion in total assets for all of the other 116. The FDIC does not cover (nor does it have to) all of the assets of a bank it closes or merges with another so they seem to have enough for now- barring a major surprise. On average, they say 13% of the banks on their watch list eventually fail. They are supposed to try to keep their reserves to at least 1.15 % of insured deposits.

As indicated by the original poster, the FDIC did borrow money in the 1990s and repaid it with interest via premiums charged to member banks. If they have not already done so, they will probably be raising premiums shortly. http://money.cnn.com/2008/08/26/news/economy/FDIC_fund/index.htm


FDIC to boost insurance fund
With balance on fund that guarantees bank deposits at its lowest level since 1995, FDIC plans to charge riskier banks higher fees to increase reserves.

Last Updated: August 28, 2008: 10:27 AM EDT

NEW YORK (CNNMoney.com) -- The recent failure of IndyMac has sent the FDIC's insurance fund balance to its lowest levels since 1995. This is forcing the regulator to boost its reserves by increasing the fees banks pay.

The Deposit Insurance Fund balance fell to $45.2 billion at the end of June, down from $52.8 billion three months earlier, according to the FDIC's quarterly bank report, released Tuesday.

The drop is due primarily to the FDIC setting aside $10.2 billion in additional provisions for insurance losses for recent bank failures.

The July failure of IndyMac, one of the nation's largest mortgage lenders, is estimated to cost the agency about $9 billion, the FDIC said.

The decline caused the reserve ratio to fall to 1.01%, down from 1.19% at the end of the previous quarter.

The Federal Deposit Insurance Corp., which guarantees bank customers' deposits up to $100,000, is required by law to maintain a reserve ratio of no less than 1.15%.

So the regulator will consider a plan in October to boost its balance within five years by charging the banks higher premiums. It plans to change its system to assess riskier banks even higher fees.

"We'll be fine-tuning assessments so higher risk activity will result in significantly higher premiums," said Sheila Bair, the FDIC's chairman. "I should say it will be enough to impact behavior."

Despite the drain on the FDIC's reserves, consumers don't have to worry that the agency won't be there to back them up, said Craig Colasono, associate director at Sandler O'Neill. But banks that are already facing hurdles could find it tough to ante up more in premiums.

"It could present a challenge for troubled institutions," he said.

[gaazn]

Wait until WAMU is added to the list. Maybe Schumer will call out WAMU like he did Indymac and cause a bank run.

[theoakman]

If the dollar collapses, don't count on getting your money out of the bank. We're all screwed, myself included.

if the dollar collapses, you'll surely get your money from the FDIC. That's the problem. Just don't count on being able to buy anything with it.