UPDATE: The FDIC Is Broke

There could be a different and unseen reason as to why the FDIC is charging an additional assessment in order to stave off insolvency.

Smaller banks are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank’s 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said [March 3rd] in a telephone interview.

According to Bill Butler, What is really going [on] is that the Bailout Banks are using the government and its insurance monopoly to help them gain market share by drastically increasing the operating costs of their smaller, better-run and scrappy competitors...Don't be fooled. The real purpose of this do-gooder cover is to bury small banks and allow Bailout Banks to seize market share.

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.

UPDATE