Sunday, September 20, 2009

FDIC Chairman Tapping Treasury Credit Line?

FDIC - Deposit Insurance Fund

Just three weeks after FDIC Chairman Sheila Bair said "Not at this point in time," when asked if she would need to tap into a Treasury credit line, she has changed her thinking and now says pretty much all options are on the table, implying a real crisis, which most of us probably know about.

At this time, the FDIC estimates that the agency will need somewhere around $70 billion through 2013 to be able to insure bank customers' deposits. The Deposit Insurance Fund now is at its lowest level since 1992.

The Deposit Insurance Fund has plunged to 0.22 percent of all insured deposits, below the mandated minimum level of 1.15 required by Congress. So far 94 banks have fallen in 2009 as of this writing.

Alt-A and commercial loans pretty much guarantee that 100s of more banks could collapse before it's over.

In May, Congress increased the FDIC credit line at the Treasury from $30 billion to $100 billion.

While Bair rightly said that the existing financial regulatory system should be changed in order to keep large banks from becoming too big to fail, she ignores that those provisions are already in place: it's called going out of business or declaring bankruptcy. This is why the Federal Reserve needs to be shut down so it can't pour taxpayers' money into the market to shore up banks and other businesses that are run poorly and can't compete.

FDIC - Deposit Insurance Fund

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