FDIC warns US bank deposit insurance fund could tank

[CompoundInterestFan]

FDIC warns US bank deposit insurance fund could tank

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

I wonder if this is actually true, or just a way to force the banks to swallow the new fees. In either case, it seems like a very stupid thing to say when it's going to be picked up by the media. I thought the idea behind FDIC insurance was to prevent bank runs? This doesn't exactly help.

 

[Dawg52]

If this happens, we are in deep do-do.

 

[bbbamI]

Yeah, I read this headline a few minutes ago before I signed on the forum.... Why didn't I just stay in bed?

 

[DblDoc]

They are going to get backing from the Treasury: Senate Moves to Loan FDIC $500 Billion - Presidential Politics | Political News - FOXNews.com

The banks balked at increased fees to help re-fund the kitty. Something similar is happening with Credit Unions also.

DD

 

[cardude]

OK, now that's scary. Especially since I have most of my cash in GMAC Bank and Capital One. They have been paying the best rates on cash that I could find at about 2.5%. Plus, I have a GMAC CD.

I would not have put my money in those two banks without FDIC backing..........

Now where do we stash our cash? Would a local credit union be safer?

 

[Lakewood90712]

The FDIC press releases are in the backdrop of new fees to be charged to the banks. The intent is to get the public backing of the FDIC action and get the banks to stop winning about fees an S.T.F.U.

This should have been done years ago , with higher rates for risky banks.

 

[summer2007]

Lakewood

I like your saying at the bottom of your post!

Jim

 

[sander06]

Tank, tanked, tanking... Tis a currently much overused word that I, for one, am tired of hearing. But that's just me... I could be totally wrong!

 

[OAG]

Is not going to happen!

 

[Spanky]

The FDIC will find a way to beef up its funding either through the banks or the public.

 

[DJRR]

The FDIC has never had enough money to cover its potential obligations and has been broke since the S&L crisis in the 1980's. Nothing new here. They are still backed by the Treasury as a full Govt. Agency and will pay whatever claims that are required. Most deposits are sold to other institutions anyway, very few are actually liquidated.

 

[Dawg52]

Is not going to happen!

Just a warning. If I ever get a good chunk of my portfolio back(yesterday mini chunk), I will be move more in the cd camp. The government will surely go belly up at that point.

 

[ziggy29]

There is simply no way anyone in government allows the FDIC to not meet obligations. None. More than anything else, I think deposit insurance has prevented bank runs that would have made the current economic situation that much more devastating.

IMO, the Treasury defaults and the government collapses before anyone lets the FDIC go insolvent. And I don't think even the former is very likely at this time.

 

[samclem]

I agree that there's zero chance of the FDIC not backing accounts. Still, Geithner's latest plan to help buy "toxic debts" uses a big chunk of FDIC money, bringing that system closer to the brink.

If there's not enough money in the budget, the government will just sell more bonds. If people/governments no longer want to buy these bonds at relatively low interest rates (which looks increasingly likely), then the government has another problem. The response will be to introduce more currency and to use this currency to back up the banks (and to do all the other newfound tasks the government and the electorate believes it should be doing--healthcare, childcare, eldercare, etc). Of course, this flood of currency will devalue the dollar and really anger the holders of long-term fixed-interest debt. Bond holders will demand higher interest rates to make up for inflation, and we'll be right back in the 1970's again, but at much higher levels. And the rest of the developing industrial nations, unhindered by similar overhead, will eat our lunch in the marketplace. Those jobs and industries won't be coming back.

 

[Gone4Good]

IMO, the Treasury defaults and the government collapses before anyone lets the FDIC go insolvent. And I don't think even the former is very likely at this time.

Yup. No worries about FDIC.

 

[ziggy29]

Thinking on this more, I think it's a shame the FDIC's premiums aren't priced like "real" insurance. If deposit insurance were priced like a real insurance product, the toxic banks with weak balance sheets, excessive leverage and more toxic assets on the books would pay a higher insurance premium per $100 in deposits than a solid, conservatively-managed bank with ample reserves and high-quality assets.

That would do two things: first, it would provide appropriate "insurance" pricing where the riskier insureds pay more. Secondly, it would provide a competitive advantage to the better-managed banks, as they could be more profitable and pass on some of the savings to customers in the form of higher yields on deposits.

 

[OAG]

Z: You are right but then we would have a "naughty" occurrence, something called "competition". As long as this need to "provide all, to all" syndrome exists we may never see real competition in the financial industry (among others) again. It is a shame that the competitive market cannot be allowed any more in this country in several areas that are of real importance.

 

[FinanceDude]

FDIC warns US bank deposit insurance fund could tank

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

I wonder if this is actually true, or just a way to force the banks to swallow the new fees. In either case, it seems like a very stupid thing to say when it's going to be picked up by the media. I thought the idea behind FDIC insurance was to prevent bank runs? This doesn't exactly help.

Why is anyone surprised? I told ya years ago that FDIC only has about $100 billion in it to cover $6 trillion or so in deposits!

All it took was some banks to fail, and the fund is dried up.......