FDIC Warns US Bank Deposit Insurance Fund Could Tank

[Cassandra]

FDIC Warns Insurance Fund Could Tank

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.

Very scary. I can't imagine what would happen should this occur.

[GREENBACK]

makes you want to just bury it in the ground.

[red92s]

So they doubled the amount in each account the FDIC will insure to restore faith in the banking system, but now are warning they are flirting with collapse? Way to go!

[Joan.of.the.Arch]

The FDIC chief said..."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 fund balance could become negative? How do they do that? They would be able to pay out money to depositors even though they don't have money to pay out? The FDIC gets to create money, too????

If the FDIC can pay depositors with negative money, then negative is positive. I think George Orwell forgot to chalk up a little rule in Animal Farm, unless "Less is More" covers this situation, too.

[Aleta]

They said that they were going to start charging the banks more. We also know that if they have to that they will just start printing money.

[sweeps]

The government wouldn't allow FDIC to fail. If obligations exceeded what was in the fund, then the treasury would just dump more money into it. And yes, that means printing more money if necessary.

Nobody likes it, but what's the alternative. Allow people to lose their deposits in the banks and we'll have a real problem on our hands.

I'm a little surprised FDIC would come out and say something like this. The whole point of having the FDIC is to maintain confidence. Telling the public that it's possible they could fail is counterproductive, if not insane.

[Russell]

I hope you're right sweeps...I can't imagine what would happen if people lost their life savings. A lot of people I know moved from stocks to cash last year anticipating this bad market we're in.

[Joan.of.the.Arch]

Originally Posted by sweeps

'm a little surprised FDIC would come out and say something like this. The whole point of having the FDIC is to maintain confidence. Telling the public that it's possible they could fail is counterproductive, if not insane.

Well, of course that makes sense, but we also must have transparency in government.

I'm trying to cultivate some que sera sera attitude. I had more than my share of anxiety even before this recession, so intend to guard against panic.

[carrieonthecheap]

Am I understanding this correctly that our savings our fine, but that the banks will start charging more fees to cover this?

So I'm worried about my retirement...now I have to worry about my savings... ??