Saturday, March 7, 2009

The FDIC Is Broke

Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair wrote in a March 2 letter to the industry that "the deposit insurance fund could become insolvent this year" if new assessments aren't levied against the banking institutions which are ostensibly "insured" by the incapable government program. This is in stark contrast to the rosy picture she painted last July when she was quoted as saying "People should not worry. Their deposits are safe".

As Kathryn Muratore points out, imagine what an actual above-board insurance company would do in an emergency - say a hurricane hitting a populated area. In the days before and after the hurricane, can you imagine State Farm sending a bill to all of its customers in the Southeast for an emergency premium hike to cover the payouts that it knows are imminent?

In years past the Congress would have simply appropriated more tax payer dollars or used the monopolistic ability of the Fed to create new money in order to stave off the FDIC collapse. But with the recent looting of current and future tax payers to pay for the "stimulus plan" and the massive creation of new money by the Fed to bail out the financial industry (including Fannie Mae and Freddie Mac), the FDIC has been forced to resort to fleecing the "insured" banks.



  1. This is truly unbelievable to me. Last night on 60 minutes, Sheila Bair of the FDIC said people should feel safer once the FDIC has taken over a bank than if the bank had never experienced any issues to begin with. Then the question was posed of whether the FDIC could potentially fail because of the increased number of bank closures to which she responded, "the FDIC is backed by the full faith and credit of the United States Government so the FDIC never goes broke."

    She also said that the FDIC is fully funded by the insurance premiums banks pay to insure that money and that taxpayer money is in no way associated with the FDIC payout of insured accounts.

    Sheila, do you think it makes me feel better that you're "backed by the full faith and credit of the United States Government?" So you're safety net is the most debt-ridden orgainization on Planet Earth? Golly Gee Sheila, my money IS safe. Also, should you ever need to get that backing, guess who's money you'll be using...that's right Shee Shee - my money - At which point it will be used to bail out a banking organization built to bail out other banking organizations. The fun never ends.

  2. Actually, Sheila, according to Section 14 (a) of the FDIC regulations, the FDIC is only able to “borrow” from the treasury in the aggregate amount of $30 billion (also known as a “Tuesday” over at AIG) at any one time.

    Of course this matters little because bylaws and regulations were meant to be either rewritten or disregarded, no? See: The US Constitution.