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FDIC Head: Fund May Run Out Of Cash

We were somewhat reluctant to post this latest sky-is-falling alarmism from the administration, via Bloomberg News:

Bair Says Insurance Fund Could Be Insolvent This Year

By Alison Vekshin

March 4 (Bloomberg) — Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”

The FDIC last week approved a one-time “emergency” fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said.

The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund

Smaller banks are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank’s 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said yesterday in a telephone interview.

“I’ve never seen emotions like this,” said Fine, adding that he’s received more than 1,000 e-mails and telephone messages from angry bankers…

Of course this is exactly the kind of talk that causes runs on banks.

Way to instill confidence in the market and consumers, Ms. Bair.

And what a way to keep small bankers in the black – by leveling a new prohibitively high fee on the backs of the banks that are still soldiering on.

This article was posted by Steve on Thursday, March 5th, 2009. Comments are currently closed.

6 Responses to “FDIC Head: Fund May Run Out Of Cash”

  1. proreason says:

    Maybe she caused the 5% drop in the Russell 2000 today.

    Nary a day goes by where the commiecrats fail to trot out someone to drive the market down.

    Then there is this news:

    “Dow Chemical shares drop to new 24-year-low”

    The crown jewels of American business fall to the Moron’s War on America.

  2. 1sttofight says:

    Buy ammo, it is guaranteed to increase in value in the coming years.

    • Right of the People says:

      Buy it early and often. See you in DC for the party!


    • Liberals Demise says:

      Don’t know about 7/4 shindig but will be there Memorial Day weekend with “Rolling Thunder” to heave a middle finger towards the HILL and WH. God….I hope O Hole stays away from “The Wall”. We turned our backs on Bubba when he had the gaul to visit Hallowed Ground. At least he had the good sense to leave his bitch at home!!

  3. U NO HOO says:

    See, if we privatized social security all of us would be without a pension/retirement. Have to keep social security under Government control now.

    And if banks are failing the government has to take them over to protect retirees’ money.

    And on and on…

    Obama not be a moron. My brother-in-law who is even smarter than I am called Obama “evil” in 2007. The kid was correct.

    Chris Buckley, you could have asked us.

  4. BillK says:

    Note it is all pure fear-mongering, as even if the FDIC fund balance dropped to zero, the Government would (ta-da!) bail it out.

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