WASHINGTON (Reuters) - The Federal Deposit Insurance Corp is seeking to more than triple its credit line with the U.S. Treasury Department to $100 billion, a move to give it more financial power to handle U.S. bank failures, the agency said on Monday. The FDIC and Congress are working to boost the agency's current $30 billion borrowing power in legislation being crafted by U.S. Rep. Barney Frank, chairman of the House Financial Services Committee. The move comes as the FDIC's deposit insurance fund has shrunk due to a significant uptick in bank failures over the past year. The insurance fund's value dropped 24 percent in the 2008 third quarter to $34.6 billion. "We would maintain that it's prudent planning to have contingency plans in place," said FDIC spokesman Andrew Gray. The House bill being prepared by Frank would also make permanent Congress's October decision to temporarily increase deposit insurance to $250,000 per customer account. The increase was hurriedly adopted as a temporary way to increase confidence in the struggling U.S. banking system. Frank said the FDIC's desire to increase its borrowing power is a safeguard to ensure the agency can quickly pay out insured deposits when a bank fails and the FDIC is named as a receiver. "They have no immediate need for it, but they just want to make sure they're not constrained in the decision by a lack of the insurance fund," Frank told reporters after meeting Treasury Secretary Timothy Geithner on Monday. "They don't want to say, 'We have to keep this bank open longer than it should because we don't have enough money.'"Is anyone still falling for the "we don't think we'll actually need anything like this, but we'd like you to authorize it really quickly just in case" ploy anymore? The FDIC, IIRC, has been funded to the tune of 1/3 of 1% -- if they actually have to backstop money-center banks' deposits, the debt picture for the country will be even worse than it is already. That is, of course, still assuming that the money could be raised; so far that's held true, but if things keep worsening we may have to revisit the assumption of unlimited federal funding.
Yuck.
In the meanwhile, I suppose the FDIC is probably better than the alternatives, what with multiple states using accelerated 'abandonment' judgments to confiscate safe-deposit boxes for sale at auction and all.
8 comments:
Sweet Jesus you are starting to scare me. Hopefully this is just a funding requirement to make the 250,000 insurance per customer account real vs. what it is today, but this really ain't cool.
Once again I'm happy to be at a credit union. Or at least I hope it's safe.
I'd love to see what the true reserves of FCUA & ESI are.... Do you have reason to suppose they're in better shape?
Other than gut feeling and I know one of the board members/directors of the credit union is VERY conservative about money and risk, no I don't have any other reason to believe my credit union is in good shape. I certainly hope it is.
That Safety deposit box thing is scary. Makes me glad I have a safe at home.
Yeah, been thinking about that myself....
I highly recommend it. It can be a bit expensive but its worth the peace of mind. And I don't have to worry about the government grabbing it out of a bank
That and the fire protection aspect. All the important documents and papers are pretty much fireproof.
Fire proof safes aren't that expensive, and yes, they're very good to have. You can even get a fire-proof lock box for pretty cheap if you don't have a lot of things to keep safe. Of course - because they're light its easier for someone to walk off with one...so pick what's appropriate. I've never used a bank safe deposit box because I'm cheap and I didn't feel like paying for something that I could do at home equally well.
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