RSS
The next bailout: the FDIC?
With bank failures on the rise, the deposit safety net is running low on funds
 

“Here’s a part of the financial crisis that has gotten little attention—the FDIC,” said Jim Mitchell in The Dallas Morning News. Normally, banks pay the FDIC an annual premium, and the FDIC covers the deposits of banks that go “belly up.” Now the FDIC is “hitting up” banks for more dough—one-time payments of, reportedly, up to five times the normal annual premium—because the feds didn’t collect enough cash in “the past few years.”

Try 10 years, said Matthew Yglesias in Think Progress. According to The Boston Globe, the FDIC “collected no insurance premiums from most banks from 1996 to 2006,” because with so few bank failures, “Congress believed” there was no need. Right. If Congress “believed” anything, it was that “they could legislate a giveaway to the banks and nobody would notice or care.”

The FDIC actually halved the premium increases for banks, after the banks “howled” that higher fees would be “draconian” in a downturn, said Paul Kiel in ProPublica. But after catching so many falling banks, the FDIC needs more money from somewhere—so it’s pushing a bill that would let it borrow up to $500 billion from the Treasury. But FDIC Chair Sheila Bair warns not to call it a “bailout”—she calls it a “cushion.”

Everybody calm down, said Campbell Brown in CNN. The FDIC, of all financial institutions, “should not be a source of panic.” Yes, 17 banks have failed this year, but “not a single penny has been lost” by FDIC-insured depositors.

 

THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER

Subscribe to the Week