FDIC warns US bank deposit insurance fund could tank

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Source: AFP

WASHINGTON (AFP) – The US government is warning banks that its deposit insurance fund could go broke this year as bank failures mount.

The head of the Federal Deposit Insurance Corporation, Sheila Bair, in a letter to bank chief executives dated March 2, defended the FDIC's plan to raise fees on banks and assess an emergency fee to shore up the fund and maintain investor confidence.

Bair acknowledged the new fees, announced Friday, would put additional pressure on banks at time of financial crisis and a deepening recession, but insisted they were critical to keep the insurance fund solvent and protect.

"Without these assessments, the deposit insurance fund could become insolvent this year," Bair wrote.

The FDIC chief said in the letter that the rapidly deteriorating economic conditions raised the prospects of "a large number" of bank failures through 2010.

"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," she wrote.

The FDIC last Friday announced it would impose a temporary emergency fee on lenders and raise its regular assessments to shore up the rapidly depleting deposit insurance fund that insures individual customer deposits up to 250,000 dollars.

A week ago the FDIC reported a sharp depletion of the deposit insurance fund in the fourth quarter due to actual and anticipated bank failures, to 19 billion dollars from 34.6 billion in the third quarter.

The FDIC said it had set aside an additional 22 billion dollars for estimated losses on failures anticipated in 2009.

Read more: http://news.yahoo.com/s/afp/20090305/pl_afp/financeeconomyusbankinggovernment

[thecrow]

1. Is this when the run on the banks begins?

:popcorn:

[Veruca Salt]

23. That's what I'm thinking.....

If FDIC goes belly up that's it for me. The savings comes right out of the bank.

[Journeyman]

2. Not to worry -- plenty of out-of-work pressmen ready to fire up the printing presses. . .

the fund could be flush with worthless paper inside a fortnight.

[angstlessk]

3. even if we put our cash in our matress...will it be worth anything or more like the confederate

cash after the war?

[atomic-fly]

4. hey Bush....how's your legacy looking now?

grrrr

[NeoConsSuck]

20. No, this is all Obama's fault

according to Cramer on CNBC.

[Grinchie]

11. It's worth a heck of a lot now, if you have it in your mattress.

However, that will change almost overnight when inflation and the lack of product becomes apparent and people start competing for inventory of products that is depleted, the manufacturing base for those products has been shuttered, or products that take months to be shipped in for Overseas producers.

Not to mention commodities that haven't been planted because the Commodity prices has tanked, or when people finally wake up to the fact that GMO food is a slow poison that really isn't good to eat when the world is all stressed out due to the depression.

[originalpckelly]

21. Actually, if the banks fail, your cash would be worth more.

Because of the fact that the supply of money would increase, due to the uninsured losses.

Instead of printing money, our money supply (the amount of money in the economy) is increased by loaning out money from depositors. A bank failure occurs when too many pull their money out of a bank, and the small amount of hard currency a bank keeps on hand runs out. The people would usually lose their money, but today we have FDIC. And people who have money in the banks under $250,000 should get it back. On the other hand, there are people with more than $250,000 in the bank, and if the FDIC can't immediately recover that, it means that the money supply collapses, because the money is no longer liquid like the depositors thought.

It makes your money more valuable, because there is less of it. Just like if there is less of a good or service in the economy, there will be a price increase in that good or service, the value of money increases. Things are easier to buy, because the money you have matters more. The problem, however, is that there will be a period of time where this all shakes out, and people will lose jobs/have pay cuts so companies can lower prices.

[Tab]

5. Given how things are, $22 billion doesn't seem like much

They think that's all they can do?

I grew up in this country, and have been through a lot of economic turmoil, but I never have been as concerned as I am right now. I think we're barely skirting disaster - or maybe we're just deferring it. But I tend to pay attention to stuff, and notice red flags, and scarily, all of them are going up at the same time.

I WANT this to be better, but I'm scared that we're in for a hell of a ride. Unfortunately, I don't think the ride has even started, and THAT scares me.

Sometimes I wish I was like my Shih-Tzu, where "Ignorance is Bliss" is a way of like. Sometimes I don't like knowing what's going on. Right now I certainly don't like what I'm seeing.

[originalpckelly]

19. The WHOLE GODDAMNED THING IS A SCAM!

Even if the federal government backstops the FDIC, which is would certainly do, the government is going to get stuck for paying for private losses, while the rich people get off with their private gains.

[AndyA]

6. No biggie...the banks will just pass on the increased costs to their customers.

After all, the customers aren't hurting, right? :eyes:

The CEOs at the failed institutions, who have made millions in salary and bonuses while their companies failed, need to PERSONALLY fund the difference. No passing it off on consumers, who are already hurting because of the actions of these CEOs.

[truedelphi]

7. I always thought that the FDIC's announcement that deposits could now be

Insured up to $ 250 K was nothing but a load of hooey.

$ 250 K up to a gazillion - what differrence does it make if the money is not there?

[Rosa Luxemburg]

8. so what now? Is China going to help out?

[sybylla]

9. Maybe its time to move my money to a credit union - insured by NCUA

If I had any money, that is.

[Critters2]

13. I did last week. Then learned that my bank had gotten TARP money

and has a troubling Texas ratio. I had my own little private run on the bank. And it felt good.

[tbyg52]

15. Mine (what little I have) has never been anywhere else.

I still remember that when my mom died the credit union where she had her money gave me $6K in addition to what she had in her accounts. I was not in any emotional shape to inquire at the time - I was just thankful - but I'm guessing they had burial policies on all their depositors, or were large enough to self-insure in that respect. Picture B of A doing *that*!

[FedUpWithIt All]

10. Thank goodness i am broke.

:hi:

Can't lose nothin' if ya ain't got nothin'

[sarcasmo]

12. Hello Mattress.

[defendandprotect]

14. FDIC was never meant to cover wholesale collapse of banking system thru fraud/corruption . .. .

Every corporation should be assessed a special tax to refund the FDIC -- !!!


PS Hope we go back to refunding the SUPERFUND for toxic waste clean ups ---

Bush also let that go bankrupt!!!

[Diclotican]

16. defendandprotect

defendandprotect

Bush have ruined everything else he have touched in his life, why should the 8 year as the President of United States be something different from everything else he have been doing all his life? He have his money, and he is known to do not care about everything else than himself.. The whole Bush clan is very good at thinking about themsel..

But, if you do go bankrupt, and have to work it out then maybe you in the US can learn something that the rest of the world have been doing for many hundred years now.. Every "super power" have been going this way.. From been on the top, to over stretch and fall.. I believe US to somehow surprise the rest of the world, but it Will be a hard time, and it Will be painfully for not just you in the US, but also for the rest of the world, to fix this horrible mess 8 year with mr Bush have given us.. Not everything is mr Bush fault. But he have his share of the responsibility as everyone else who have been in charge the last couple of decades...

But, maybe something good Will come out of this.. Capitalism on the rampage is never good, and should been curtailed once and for all.. The Friedman ideology should have been disbanded as other extreme ideology over time have been disbanded and just given to the smallest extremists groups.. The neocon ideology should also have been disbanded, and put to the grave. They are no less than a Cancer for US, and the guilty of them, should after a trial be put where they belong, in prison... And for the generations to came, this type of ideology, who have more or less ruined your country, should be shunned as nazism have been shunned by most people in Europe since 1945... It is _not_ specially popular to be a neo-nazi in most country over here.. And if YOU learn your lesson, the idea of been a Friedman ideology or a neo-con ideology, should be very similar to what a neo nazi is in Europe today. But that is, if you learn something about this then...

Diclotican

[lonestarnot]

18. Here here.

[defendandprotect]

22. Agree, agree, agree ---

that we are still trying to live with capitalism is astonishing!!!

[originalpckelly]

17. The FDIC's liabilities are $4.6 TRILLION, their fund was $19 BILLION?

You have to be fucking shitting me.

[Peace Patriot]

24. Oh, that's just great-a bankrupt FDIC. Be warned, friends, about 2012...and

THROW DIEBOLD & ALL 'TRADE SECRET' CODE VOTING MACHINES INTO 'BOSTON HARBOR' NOW!

I have great trepidations about what the corpo/fascists are going to use their 'TRADE SECRET' control of our elections for, in 2012.