FDIC may borrow money from Treasury: report
Wednesday, August 27th, 2008 | 
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Posted by John under: Perplexity,Root of All Evil
Reuters) – Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.
Perplexity
“…upon the earth distress of nations, with perplexity…”
—Luke 21:25
Root of All Evil
“For the love of money is the root of all evil…..â€
—1 Timothy 6:10a
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.
The borrowed money would be repaid once the assets of that failed bank are sold.
“I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses,” Chairman Sheila Bair said in an interview with the paper.
Bair said such a scenario was unlikely in the “near term.” With a rise in the number of troubled banks, the FDIC’s Deposit Insurance Fund used to repay insured deposits at failed banks has been drained.
In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.
The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.
The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
The fact that the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis, the Journal said.
(Reporting by Sweta Singh in Bangalore; Editing by Erica Billingham)
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Larry Russell says Comment posted on August 28th, 2008
I feel that the FDIC should NOT be bailed out by the American taxpayers. The FDIC is a government program using government funds. The treasury belongs to the American taxpayers and as such should not be used without the approval of every american citizen paying taxes. I’m sure most Americans would agree that they don’t want their money used to bail out some reckless financial instution.
nanc says Comment posted on August 28th, 2008
WHEN oh when are people going to be made to be more responsible for themselves?
guess the treasury can just print some more money if it pleases – this nation is in for a world of hurt – how and when did we fall so far, so fast?
hosha na Moshiach.
becca says Comment posted on August 28th, 2008
American citizen no longer have a voice in our gov’t. There are rare times when someone’s voice will be heard but it less and less frequent each year. Our tax dollars shouldn’t be used to fund planned parent hood, to bail out other countries etc. We earn the money and they take and spend it as they please. Gee, I think when you take something someone else earned it’s called robbery! Can I get an amen?
Randolph Wolfson says Comment posted on August 28th, 2008
So, am I living in a cave or does it appear that the FDIC is, has been and always was just a mirage created to make it seem as if our banks were a safe place to leave our assets? I don’t know about you, but I have not heard about the critical rash of banks going down the tube – I have only heard of several banks – not hundreds of banks – being forced into receivership. If the FDIC has to turn to the US Treasury to cover the debt of only a very few belly-uppers, just how safe is our banked dough? Not very, I’d say. U.S. banks are “regulated†such that they are permitted by the FDIC to lend 9 dollars out for every 1 dollar the hold in savings. They are required to maintain a reserve of funds and pay a set amount to the FDIC to fund the $!00K per account FDIC insurance. With such a small rumble in shaky banks, who can answer for us why the FDIC must go back to the Government’s Treasury to cover threatened accounts? The Answer is simple, the FDIC is out of money. It never did have enough money to cover a National crisis in money. Moreover, what does that mean – “borrow from the U.S. Treasuryâ€? It means either the taxpayer pays the freight for these failed banks (who greedily glutted on very poor mortgage loans) or the government prints more money to cover these “regulated†banks. Either way, it is very inflationary.
Not only is the value of our dollar rested completely upon our faith that it has any value at all [since we haven’t the hard metal reserves to back it up], but now we learn the FIDC is just a hoax. Hard lessons with no simple solution. Jesus is the answer. There is no other.
Lance Gilman says Comment posted on August 29th, 2008
Thanks Randolph.
Who wants to buy bad loans?
The Chinese?
The Saudis?
The United Arab Emirates?
All of our best friends.
Tough to find a safe place to store up our earthly treasures.