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

Jobs vs Productivity

Speaker of the House Nancy Pelosi said that the goal of the stimulus plan is to create jobs. This is wrong for two reasons:

First, it is not the government's role to create jobs or stimulate the economy. The free market is perfectly capable of creating jobs and promoting economic growth without the government. The problem that must first be identified is that what we have is not a free market. There are myriad acronymic federal agencies that pepper the economic spectrum that remove any real functionality from a true free market. A true free market would be one without the interference of the largest destructor of wealth the world has ever known -- the Federal Reserve. A true free market rewards for success and punishes for failure.

Second, the goal should not be job creation but productivity. Twentieth century British economist John Maynard Keynes was such a proponent of government's role as the creator of jobs that he recommended that government pay people to dig holes and fill them up. Unfortunately this philosphy has spread like a disease throughout the media, politics, and academia. Productivity is the key to economic viability, and the easy credit conditions created by the Fed and the misdirected focus on job creation without long-term sustainability is what has turned this nation into the largest debtor and consumer in the history of mankind.

Read Tom Woods' article.