The FDIC is out of money
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The FDIC is out of money

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    Senior Member Cdog's Avatar
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    Default The FDIC is out of money

    FDIC's Coffers Are Depleted, It May Need Help
    FINANCIALS, BANKS, BANKING, FDIC, FUNDS, CASH, GOVERNMENT,
    The Associated Press
    | 27 Aug 2009 | 02:48 AM ET

    The coffers of the Federal Deposit Insurance Corp. have been so depleted by the epidemic of collapsing financial institutions that analysts warn it could sink into the red by the end of this year.

    That has happened only once before — during the savings-and-loan crisis of the early 1990s, when the FDIC was forced to borrow $15 billion from the Treasury and repay it later with interest.

    The government agency that guarantees depositors against the loss of their money in a bank failure may need its own lifeline.

    The FDIC on Thursday will disclose how much is left in its insurance fund, and update the number of banks on its list of troubled institutions. That number shot up to 305 in the first quarter — the highest since 1994 and up from 252 late last year.

    FDIC Chairman Sheila Bair may also use the quarterly briefing to discuss how the agency plans to shore up its accounts.

    Small and midsize banks across the country have been hurt by rising loan defaults in the recession. When they fail, the FDIC is responsible for making sure depositors don't lose a cent. It has two options to replenish its insurance fund in the short run: It can charge banks higher fees or it can take the more radical step of borrowing from the U.S. Treasury.

    None of this means bank customers have anything to worry about.

    The FDIC is fully backed by the government, which means depositors' accounts are guaranteed up to $250,000 per account. And it still has billions in loss reserves apart from the insurance fund.

    Because of the surging bank failures, the FDIC's board voted Wednesday to make it easier for private investors to buy failed financial institutions. Private equity funds have been criticized for taking too many risks and paying managers too much.

    Softer Rules for Buyers

    But these days fewer healthy banks are willing to buy ailing banks, and the depth of the banking crisis appears to have softened the FDIC's resistance to private buyers. Under the new rules, a buyer would need to maintain the failed bank's reserves at levels equal to 10 percent of its assets. An earlier proposal set the requirement at 15 percent.

    The new policy also eases the rules on when private investors must maintain minimum levels of capital that might be needed to bolster banks they own.

    But the FDIC sought to guard against private equity funds that might want to quickly buy and sell at a profit: It required the investors to maintain a bank's minimum capital levels for three years.

    At least in theory, allowing private investors to buy failing banks would mean the FDIC could charge a higher price, shrinking the amount of losses the agency would have to cover.

    Bair has not ruled out hiking premiums on banks for the second time this year or asking the Treasury for a short-term loan. She has said taking the longer-term step of drawing on the Treasury credit line is only for emergencies.

    So far this year, 81 banks have failed, compared with just 25 last year — and only three in 2007. Hundreds more banks are expected to fall in coming years because of souring loans for commercial real estate. That threatens to deplete the FDIC's fund.

    "I think the public should expect the fund to go negative at some point," said Gerard Cassidy, a banking analyst at RBC Capital Markets, which has predicted that up to 1,000 banks — or one in eight — could disappear within three years.

    Either lifeline for the FDIC carries risks. Borrowing from the Treasury could be seen as another taxpayer bailout. But charging more in premiums would shrink profits at healthy banks, squeeze troubled ones and make lending even tighter.

    "The more you levy these assessments on banks, the less money they have to lend to the general population," said Camden Fine, president of the Independent Community Bankers of America, an industry group that represents 5,000 banks.

    Last week's failure of Guaranty Bank in Texas, the second-largest this year, is expected to cost the FDIC $3 billion. The FDIC recorded more than $19 billion in losses just through March. The agency figures it will need $70 billion to cover bank failures through 2013, more than five times the $13 billion that was in the fund in March.

    The last time it was that low was during the S&L crisis in 1992, when the fund was down to $178 million. Some critics say regulators have taken too long to shut down troubled banks. Chicago's Corus Bankshares, for example, has staggered for weeks under the weight of bad real estate loans.

    FDIC spokesman Andrew Gray said the agency seeks to strike a balance between helping troubled banks work through their problems "so there's zero cost to the deposit fund," and intervening quickly if there are no other options.
    © 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

    URL: http://www.cnbc.com/id/32576575/

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    U Member, Member? Excessive Force's Avatar
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    that there is some scary shiot. funny i have this frend whos all into conspiracy theories in the biggest way you could not imagine. well all the stuff that has came out of her mouth has eventually become public and has came to happen!! thats scary!!! think i need to listen to her more.
    E.F.
    Can we bankrupt this country in four years?
    "Yes We Can."

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    Senior Member scooooter7's Avatar
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    "None of this means bank customers have anything to worry about."

    Of course not, not at all.
    HALEY: “I’m just worried about this house that’s on fire and I’m trying to keep it from burning down.” Well it looks like Haley's time in KC burned down, so off to the Steelers he goes. See ya!

    http://www.theworldwar.org/s/110/new...community.aspx

    http://en.wikipedia.org/wiki/Super_Bowl_IV

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    Senior Member motormonkey's Avatar
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    Just another step towards being like the rest of the world. This kinda thing is pretty common in Europe. A banking friend always says "nothing is as sound as the pound" and always proves right.

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    E-7 Sheepdog (ret) SmokinLowriderSS's Avatar
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    The FDIC will be fine, They are printing plenty to re-fill it as needed, from the next 857 page Stimulous Package no-one will read before passing.
    "As democracy is perfected, the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart's desire at last and the White House will be adorned by a downright moron."
    H.L. Mencken

    OBAMA: Some people deserve this.
    The rest of us are being dragged along kicking and screaming.

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    Temporarily Pacified! donzi5150's Avatar
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    Printing presses running 24/7.....thats what the libtards voted for and support.....sound government practices!

    "On every question of construction (of the Constitution) let us carry ourselves back to the time when the Constitution was adopted, recollect the spirit manifested in the debates, and instead of trying what meaning may be squeezed out of the text, or invent against it, conform to the probable one in which it was passed."
    Thomas Jefferson letter to Justice William Johnson, June 12, 1823

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    E-7 Sheepdog (ret) SmokinLowriderSS's Avatar
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    Quote Originally Posted by donzi5150 View Post
    Printing presses running 24/7.....thats what the libtards voted for and support.....sound government practices!
    As reluctant as O's supporters are to hang in here and support their guy right now, just wait for the 13% inflation and 20+% interest rates return.
    I'm sure they'll come tell us how wonderfully genious he is then, and how wise their choice of "change" was.
    "As democracy is perfected, the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart's desire at last and the White House will be adorned by a downright moron."
    H.L. Mencken

    OBAMA: Some people deserve this.
    The rest of us are being dragged along kicking and screaming.

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