When FDIC head Shelia Bair says her agency might have to bolster the FDIC’s insurance fund with Treasury borrowings to pay for the new spate of bank failures, a lot of us, this 40-year banking veteran included, assumed there’s an actual FDIC fund in need of bolstering.
We were wrong. As a former FDIC chairman, Bill Isaac, points out here, the FDIC Insurance Fund is an accounting fiction. It takes in premiums from banks, then turns those premiums over to the Treasury, which adds the money to the government’s general coffers for “spending . . . on missiles, school lunches, water projects, and the like.”
The insurance premiums aren’t really premiums at all, therefore. They’re a tax by another name.
Actually, it’s worse than that. The FDIC, persisting in the myth that its fund really is an insurance pool, now proposes to raise the “premiums” it charges banks to make up for the “fund’s” coming shortfall. The financially weakest banks will be hit with the biggest tax hikes.
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6 comments:
This is madness. Our country is being taken out and destroyed from the inside, by our own people. "We have met the enemy, and he is us."
Save your extra clues, folks. I just got one of my own.
This is just stupid. Nothing has changed with the FDIC except that the limits have increased. Just another terror tactic of the Redumblicans. This crap doesn't work anymore. If you believe this stuff you're talking to yourselves.
3:44 you are so right--the only thing that has changed with FDIC is the limits that have increased from $100,000 to $250,000. The FDIC is - as it always has been - back by the full faith of the US Government.
As far as bank bailouts--those are the big banks elsewhere--not your local community banks. your community banks are safe and sound!!!
You people need to stop trying scare tactics. It makes the economy worse not better.
F.D.I.C.
Frank and Dodd Income Continuance
Thats right, and there's plenty money in the soc. security too....
NOT!
Yes it is backed by the full faith and credit of the United States Government. You are correct. However, what does that mean?
The FDIC claims to be a fund. The premiums it collects from banks are specifically for one purpose and that is to gauruntee our deposits. Recently they agreed to gauruntee them at a higher level. However, the point of the article is to explain the FDIC has not kept the money in a fund. Now we are at the mercy of the General Fund which is in debt trillions of dollars. What order of payment will we come when the ultimate collapse of this government ocurrs? The bond holders of GM thought they were in a gaurunteed position also! However, they got 40 cents on the dollar assuming the new GM is worth as much as the old GM was prior to the collapse.
This is also exactly the same as what has happened with our Social Securit Trust Fund. It has no money.
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