Another lesson that federal guarantees aren’t free:
WSJ, The Coming Deposit Insurance Bailout, Sept. 1, 2009
The Federal Deposit Insurance Corp. reported late last week that the fund that insures some $4.5 trillion in U.S. bank deposits fell to $10.4 billion at the end of June, as the list of failing banks continues to grow. The fund was $45.2 billion a year ago.
The FDIC has since had to buttress the fund with a $5.6 billion special levy on top of the regular fees that banks already pay for the federal guarantee. Everyone now assumes the FDIC will hit banks with yet another special insurance fee in anticipation of even more bank losses.
Earlier this year they quietly asked Congress to provide up to $500 billion in Treasury loans to repay depositors.
84 banks have already failed this year, and … the FDIC said it had 416 banks on its problem list at the end of June, up from 305 only three months earlier. The total assets of banks on the problem list was nearly $300 billion, and more of these assets are turning bad faster than banks can put aside reserves to account for them.
FDIC Chairman Sheila Bair continues to say that deposits will be covered up to the $250,000 per account insurance limit , and of course she’s right. But we wish she’d force Congress—and the American public—to face up to the reality of what deposit insurance costs. Amid the panic last year, Congress raised the deposit limit from $100,000 to $250,000.
The $250,000 limit was supposed to expire at the end of 2009, but in May Congress extended it through 2013, and no one who understands politics thinks it will return to $100,000. The rising bank losses mean that the FDIC’s ratio of funds to deposits is down to 0.22%, far below its obligation under the insurance statute to keep it between 1.15% and 1.50%.
Full article:
http://online.wsj.com/article/SB10001424052970204731804574385072164619640.html
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The Homa Files 
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