FDIC May Become Insolvent This Year

[Me.]

As piggy banks become more and more attractive:

FDIC’s Bair Says Insurance Fund Could Be Insolvent This Year

“March 4 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair said the deposit insurance fund 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 was drained by 25 bank failures last year.” Cont…

http://www.bloomberg.com/apps/news?pid=20601087&sid=alsJZqIFuN3k&refer=home

[CountAllVotes]

1. gee more good news!

NOT!!!!

:nuke:

:kick: & recommend

[Individualist]

2. Start stuffing money under the mattress?

:scared:

[ThomWV]

3. Not a chance on earth.

The FDIC will never be allowed to come even close to failing - because that would indeed signal the end for virtually every individual in the country. Ain't gonna happen; Social Security will go down the tubes first. The powers that be will do anything to keep it afloat.

[backscatter712]

7. I agree. The FDIC will not be allowed to fail.

Obama won't let it happen - he'll feed them enough money to keep them going. Failing to do so would mean economic total protonic reversal. That would be Bad.

[originalpckelly]

25. They keep sweeping it under a bigger rug, but after the government...

what rug is there?

[crimsonblue]

8. I'd argue that the FDIC is far more important than SS.

Yes, millions of Americans depend on SS to make it through each month, but were the FDIC to fail, we would see a run on the banks the likes of which we cannot even imagine. The credit markets would come to an absolute stop, public panic would cause millions of Americans to rush to their banks to withdraw their money. Even the most fiscally sound banks do not have the cash on hand to pay out all of the deposits they are holding, so bank failures would be expected. If we want Great Depression 2.0, then let the FDIC fail.

[tom_paine]

19. I hope you are correct. And I also hope that, if true, it won't be a pyrrhic victory.

Like the Battle of Bunker Hill was...for the Brits

[amandabeech]

23. Medicare is in worse shape than Social Security.

I think that Medicare and Medicaid (nursing homes) will cut back very dramatically before Social Security ends.

Social Security payments may end up decreasing, but so long as money comes into the system, money will go out to retirees.

In fact, so long as the U.S. Treasury can still sell T-bills, it will fund the redemptions of the special Treasury bills held by the Social Security Administration.

Just upping the income subject to Social Security by a reasonable amount will help keep it solvent.

Medicare--it will be more difficult to fix.

I just hope that Obama will help Part D (prescription drugs) by consolidating the purchasing function to get better deals. That would help.

[originalpckelly]

27. There's just a fundamental problem here:

We don't have enough young people to pay for the old people, even under the most drastic taxation regimes. The old 1:40+ people supporting someone on SS is not tenable. And privatization will only open the system up to fluctuations in the stock market.

So, unless we determine a way to become very productive very soon, the quality of life and life expectancy of America is about to be dramatically reduced.

[amandabeech]

33. I disagree. While the ratio of working to retired will drop,

the working have been putting in extra $$$ for some time now. I know because those laws kicked in just as I joined the labor force.

I don't think that 40 to 1 has been the ratio any time in last 30-40 years of solvency.

If we were to raise the amount of wages on which social security taxes must be paid at the current higher rate to $150,000 or so, we'd go a long way toward solvency, so long as the General Fund makes good on the bonds held by the social security administration.

If I were you, I'd check a variety of studies and cites before you make up your mind on social security. It sounds like you've been reading Republican talking points aimed at convincing younger people that social security is dead--so that so same Republicans won't be blamed when they kill it.

[Junkdrawer]

4. So we're paying off bets AIG made with foreign banks, but we won't insure OUR OWN CITIZENS...

bank deposits.

In a pig's eye.

That really would be torches and pitchforks time...

[AyanEva]

5. My reaction:

Groaning, "OH GOD" out loud. D:

[crimsonblue]

6. Increasing the insurance of deposits to $250,000 was idiotic.

First of all, 95% of accounts never top $100,000, so it's usefulness is limited. Secondly, by increasing the deposit insurance, the FDIC is forcing all banks to move up to the new limited (thereby increasing fees owed by banks), and banks that do not may see consumer panic on their bank. The $100,000 deposit guarantee was sufficient. All the new guarantee did was force banks to pay more fees in case of a non-existent bank run scenario.

[TheCoxwain]

9. STOP SPREADING FALSE RUMORS ! ... YOU ARE SHOUTING FIRE IN A CROWDED THEATER!!!

[tom_paine]

20. Ummm....if the theater is already on fire, is shouting FIRE! such a bad thing?

n/t

[Me.]

22. A. IX-nay On The Caps

and B. you're yelling at the wrong person. If the head of the FDIC is saying this there already are sparks.

[Individualist]

29. Why do you believe this is a rumor?

[Renew Deal]

30. Is this a joke?

The OP didn't write the article. I think. :shrug:

[Blackhatjack]

10. IF the FDIC becomes insolvent, or even hints it is insolvent, you will see a 'run on the banks' ....

... that will stop the economy in its tracks.

[margotb822]

11. My thoughts exactly

Bank failures are bad, but this would be the end.

[originalpckelly]

26. Fuck, even with FDIC look at what happened to IndyMac...

there was a run on the bank there. It's inherent in fractional reserve banking.

[Renew Deal]

32. You'd have to be an idiot to have more than $100K or $250K in a bank.

And I mean any bank. Part of the problem at IndyMac was that people had too much money in their account. People justifiably tried to get it out.

[TBF]

12. OK, take this propoganda with Obama's urging to buy stocks last night

and what do you get? The elites trying to prop up their corpse of a free market by luring in innocent "investors" and scaring you that the FDIC will not be solvent either.

Absolutely shameful. Do not fall for it.

[leftstreet]

16. Right you are

A true Patriot is willing to Borrow and Invest!

[TBF]

17. good cartoon! n/t

[DemReadingDU]

13. FDIC would borrow from taxpayers by taking loan from Treasury

2/27/09 Bank Failures Take Toll on Insurance Fund

By Binyamin Appelbaum
Washington Post Staff Writer
Friday, February 27, 2009; Page D02

The federal insurance fund that protects most bank deposits is being drained by a sharp rise in bank failures and has dwindled to its lowest level since 1993, the Federal Deposit Insurance Corp. reported yesterday.

Depositors are not at risk because the fund is backed by the government, but taxpayers could be forced to reach into their wallets if the decline continues.

When a bank fails, the FDIC pays up to $250,000 to each account-holder to replace whatever money does not remain in the vaults. The fund is replenished by assessments on banks, but over the last year, much more money left than arrived. And the pace of bank failures continues to increase.

The fund held $52.4 billion at the beginning of 2008. One year and 25 bank failures later, the fund held $18.9 billion.

So far this year, 14 banks have failed, draining another $1.7 billion from the insurance fund.

The FDIC's board is scheduled to vote this morning on increasing the quarterly assessment that banks must pay. The board also could vote to impose a one-time special assessment to replenish the fund more quickly. FDIC officials declined to say yesterday how large an increase was likely.

If money cannot be collected quickly enough from the industry, the FDIC could be forced to borrow money from taxpayers by taking a loan from the Treasury Department.

more...
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/26/AR2009022603005.html?hpid=topnews

[Me.]

21. Thank You

[jtrockville]

14. Time to make a run on the banks?

[high density]

31. That seems to be the reasoning for Ms. Bair's comments

I guess she wants to have a replay of Bear Stearns except amplified a few thousand times.

[leftstreet]

15. Yes, because most Americans have TONS of $$ in the banks

A run on the banks

:rofl:

[originalpckelly]

28. Good point, but even just pulling out what little they've got...

is going to have a profound effect on the system. While 70% live paycheck to paycheck, they still have to put that paycheck in the bank, now don't they?

The whole house of cards is falling down.

[reggie the dog]

34. yes a run

I just might take out my two thousand euros here in France and my thousand dollars in the USA. Lots of us would do that and more.

[nc4bo]

18. Oh dear. Let the stampede begin....

people are already skittish as hell and it won't take much more to cause a real serious full fledged panic.

Let's see how many other media orgs will pick this story up and run with it. :scared:

[scheming daemons]

24. This is a highly irresponsible OP.... the FDIC will not be insolvent ever

The Fed will back the FDIC. The only way it becomes insolvent is if there no longer *IS* a United States of America.

At that point, money is worthless anyway.

[Pale Blue Dot]

35. Irresponsible K&R. nt

[Me.]

38. Nonsense

"Federal Deposit Insurance Corp. Chairman Sheila Bair said the deposit insurance fund could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency."

[chill_wind]

39. If you're going to shoot the messenger

that would seem to be Bloomberg News, wouldn't it?

[ProdigalJunkMail]

36. excuse me...i think i shall go to my bank now...

in favor of a mattress...

sP

[distantearlywarning]

37. I'm bookmarking this thread.

I really hope I don't get to use it to say "I told you so" six months from now...