F.D.I.C. May Ask Banks to Bailout Insurance Fund

September 22, 2009

(ChattahBox)—According to the New York Times, Senior regulators from the F.D.I.C. are seriously contemplating a plan to obtain billions in needed funds from healthy banks to shore up the near depleted insurance fund. The loans from banks would enable the F.D.I.C. to continue to insure depositors in the next wave of bankfailures, without the need to borrow tax-payer money from the Federal Treasury.

The banks also like the plan, because they would not be stigmatized with another costly emergency assessment of $5 billion to $10 billion when additional banks fail. Bankers and their lobbyists are strongly supporting the plan.

Sheila C. Bair, head of the F.D.I.C., also is keen on the idea, because she is reluctant to use her authority to borrow tax-payer funds from the Treasury. A loan from the Treasury could be viewed as another public bailout of the banks, which would fuel further inquiry into how banks operate and pay their executives.

Additionally, it’s been reported that Bair and Tim Geithner have been at odds over how to handle bank bailouts. Camden R. Fine, president of the Independent Community Bankers said, “Sheila Bair would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help. She’d do just about anything before going there.”

Meanwhile, banks continue to fail, creating a sense of urgency to replenish the insurance fund. Since January, 94 banks have failed, causing the near depletion of the deposit insurance fund.

The F.D.I.C fund, as it stands now, could be wiped out today from a single large bank failure.


2 Responses to “F.D.I.C. May Ask Banks to Bailout Insurance Fund”

  1. GlfBook - Financial News Daily » Blog Archive » F.D.I.C. May Ask Banks to Bailout Insurance Fund | ChattahBox News … on September 22nd, 2009 12:35 pm

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  2. Ron Derven on September 22nd, 2009 11:42 pm

    If the “healthy” banks have enough money to bail out busted banks, perhaps they would have enough to begin lending again to small businesses because many, many of them are odd man out in this current debacle.

    Ron D

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