Could the FDIC Go Broke?
By Larry Doyle on March 5, 2009 at 12:11 PM in American Consumers, Banking Institutions, Commerce, Current Affairs, Economy, Insurance Policies & Industry, Mortgages, Retail Businesses
In very short order, the FDIC (Federal Deposit Insurance Corporation) has seen its reserves plummet from $50 billion to $18.9 billion at the end of 2008. At that pace and with the expectation of more bank failures, could this bedrock of our national banking system go broke? Well, FDIC’s Bair Says Insurance Fund Could Be Insolvent This Year. Is Sheila Bair unnecessarily sounding warning signals? Am I running to the bank to withdraw my money? No and no.
Sheila Bair is proactively managing expectations for all concerned, those being politicians, regulators, bankers, and consumers. In fact, if she did not highlight the current state of the FDIC reserve fund and expectations for future declines, she would not be fulfilling her obligations.
The FDIC is funded by making assessments on all the banks throughout the country. With those assessments assuredly headed much higher, bank earnings will be dramatically impacted this year. In fact, analysts believe that many banks’ earnings will decline by anywhere from 50% to 100%!! The smaller community banks are enraged by the prospects of higher assessments given that many if not most of these banks managed their businesses with appropriate risk controls.
Read the rest ->
While taxpayers do not directly fund the FDIC, the fees incurred by member banks will be passed along to consumers in the form of increased charges on every transaction. If you feel like you are getting “nickeled and dimed” to death it is due to these increased FDIC assessments.
In light of this situation, what is one to do? First and foremost, make sure you do not have any deposits over the FDIC insured deposit limit of $250k at any one institution. The FDIC website has a wealth of information including an online estimator to assist you in calculating your FDIC insurance coverage. Additionally, proactively manage your finances so you can minimize your banking needs. I continue to encourage people to shop around for your banking needs, as well as for insurance and all other financial needs. Credit unions remain a great alternative to many traditional banks.
LD
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Color it gone.
i dont understand. The FDIC which secures all of our money’s at $50 billion was secure, didnt we just spend $800 billion in a “stimulus” bill, wouldnt designating $25-50 billion to the FDIC to secure everyone’s money make more sense then spending it on expanding Pell grants?
It can and It will. The FDIC only has 1.5% of what it needs.
http://www.garynorth.com/public/91.cfm
The FDIC will run to the Fed and Tres and get bailed out with your tax money to inure your deposits.
Just another shell game.
Larry:
One question …
They have tried so many assinine ways to stop this free fall … why not just take the 5% penalty off of dipping into 401K and IRA funds for a year and let people have access to their money?
Good question, good idea!
Perhaps they should postpone that penalty but it could very well be that the markets and economy would view a move like that as a “panic” move, meaning that the authorities must know something they’re not sharing with the public to promote that option.
Well, the authorities knew the depth of these problems and did not share these insights with the public.
Absolutely right. Now I know I am the gloom and doom fellow but calm down people, fdic is not going to need any more funds that what it has. The toxic assets just need to be sold (to us/but no) and the deposits are not in jeopardy. Actually if the system would be transparent and give us a chance (but it will not) deposits can be used to buy some of those toxic assets and some of those may turn out a sweet profit. Opps but what am I saying. The Saudi Prince has his eye on all of them. What’s the use. Maybe one day we will all work for him.
You could not be father from the truth. See the above link. FDIC reserves is **NOT** something someone should amke into a political hot potato. If there was not a problem, they would be talking about it.
Rush was just talking about this. He said it might be broke in six months! He also covered how we’ere angering and humiliating our biggest ally the UK. Gotta say, who didn’t see disasters like this down the road from this guy?
Seems irresponsible on his part since he has to be just guessing.
Do you really think so? Seems like the FDIC’s Sheila Bair is saying the same thing …. so it’s okay if our officials say it but not okay for private citizens to comment on it? Do you hear yourself?
I thought I heard her say that but she too was guessing.
Why are deposits jeopardize if what is toxic are mortgage and other credit derivatives?
If banks get in trouble with funding, they can raise fees on business accounts big time and cover what they need. Those amount would be meaningless to consumers. And if need be they can also raise fees to individual accounts (temporarily of course).
thought I heard her say that but she too was guessing.
Is there some part of that that makes you feel more comfortable that it comes straight from the FDIC? You do understand that the FDIC raised its fees to avert the insolvency? The member banks now pay more. Whether you were a “good” or “bad” bank. Why are you commenting about things that — and I hope you will take this in the spirit in which it is intended — clearly clueless about? I don’t understand it myself, but I can use google and put two and two together …. Rush (or his staff) has access to the information as well. He’s reading it on the air. And thank GOD. Google news thinks the most pressing “news” is college basketball scores ….
Why haven’t we heard more about these community banks who acted responsibly?
irresponsible media pandering to the large banks and pols!!!
Why didn’t we hear about the impending economic meltdown before Sept 2008?
Good heavens. No where to hide. Glad I have my stuff in a CU, but what keeps them from being pulled in?
Yes, Larry. I would like to know more about exactly why credit unions might be a good choice.
Credit Unions MIGHT be better bec they usually only handle accounts for a certain industry types. Usually larbor types. They have strict rules and did not play games. My CU offered me a home loan but they wanted 25% down! (ya, ok) In my neck of the woods that would amount to $75,000 – 80,000. Need less to say they do not have much mortgage exposure………
Credit unions’ deposits are not insured by the FDIC. Instead they are insured by the National Credit Union Administration (NCUA). Therefore CUs wouldn’t be subject to the new higher assessments from the FDIC. Secondly, CUs exist to serve the banking needs of their members. As such they are prohibited from investing in a lot of the things that are causing the banks grief.
We’ve just spent trillions to prop up failing institutions which are still going to fail. We just blew the future. If you have money anywhere it’s not safe, there is no place to hide. Inflation will eat it up if you put it under your mattress, Obama will take it if it’s in a bank.
We are morphing into a socialists Utopia; all of us will now be equally miserable.
If dollars are soon to be worthless, why is everyone hanging on to them? Why aren’t they exchanging them for goods? There doesn’t seem to be a big run on the retail stores, even though prices are low.
And if gold can only go up while dollars are going down the tube, why are people so eager to exhange their gold for your dollars?
That’s exactly what I’m afraid of. We don’t have a lot, but for now we have jobs. Aside from paying extra on the mortgage, I’m not sure what we can do.
Cramer has a response to the POS up on his website. More than 90% agree with Cramer. More than 800 comments …. people are HOT!
We all thought that Der Shrub wasn’t real bright. But the implosion of government institutions/agencies established under The New Deal, encouraged by 43’s laissez-faire, get-it-while-you-can policies continues to roll back 75 years of financial progress and stability for Joe and Mary Sixpack.
But I will beam with pride when, living under a bridge in a refrigerator box, I remember that he kept our boys out of Northern Ireland!
ummm, der shrub???????? I love W, but that is a laugh out loud. heeheehee
LD, thanks for another great piece. Can you explain why credit unions are preferable to banks?
Credit unions are operated for the benefit of their members.
I don’t pretend to be an expert on credit unions but from my experience they are much more conservatively managed than banks in terms of investments they make with their money.
Credit unions are operated for the benefit of their members
Countires used to be operated for the benefit of theirs …..
Larry..
So why is AIG Getting all that MOney and “STIMILUS” Money being thrown around like Robin Hoods gang at a Peasant Party ..
Can’t they give the FDIC some too..or is responsible Government too much to ask for any More..
Like Mr. Dobbs says..Don’t the people deserve BETTER…??
Oh..I forgot..itsd not really about WE THE PEOPLE..
Its Whose got the “POLITICAL CAPITOL…”
What a Circus that Is…Donkeys and Elephants..and Lots of CLOWNS…
Patrick…Yes, ultimately all of these costs end up getting passed through to consumers.
I read on another blogpost that AIG is getting all of this money because AIG is the one that holds all of the 401K’s, etc. for Congress. Don’t know if that is true but that would make sense why everyone says they “can’t let AIG fail”. It’s worth looking into and raising holy h*ll if true.
Mr. Doyle, The Tribe Has Spoken.
Here is an interesting note:
2006 (after 6 years of Bush and Repub. congress)-Unemployment:4.50%, Annual Deficit spending: $200 billion, Accumulated Fed debt: 8.5 trillion
Democrats take control of the House and Senate (where finances bills come from)
2009 (after 2 full years of Dem. control)
Unemployment:7.60%, Deficit Spending:$1.7 trillion, Accumulated Debt:12.7 trillion.
with 2010 projected to be even worse. funny how it is easy to blame Bush and act like the Dems were innocent bystanders or powerless to do anything. They controlled congress at a time when the president had approval rating in the 30% range. What did they do? exactly what they are doing now. make things worse.
Guess it matters who is at the helm. Didn’t Bill Clinton leave us with a trillion dollar surplus?
Because we had GWB, we now have BO. Different puppets, same puppet masters.
Why does it matter who is “at the helm”, as congress you don’t even have to bring the presidents budget to the floor. I think that is a foolish extrapolation. Bill Clinton was working with a Republican congress that restrained his spending. Clinton ALWAYS proposed more spending then congress allowed.
I love how everyone likes to give Clinton credit for the balanced budget when it was the Repub. congress that dragged him there kicking and screaming. The dems are the ones that claimed a balanced budget is unimportant. It helps to know history, unless it gets in the way of your ideology.
http://www.cnn.com/US/9512/budget/budget_battle/index.html
http://query.nytimes.com/gst/fullpage.html?res=9C04E1DA123AF937A35757C0A96E958260
http://people-press.org/report/133/clinton-ratings-hold-balanced-budget-a-public-priority-but-few-see-personal-payoff
MEanwhile…The Federal Reserve refused to tell Congress who got $2 Trillion in Bailout Money!
SEE THE MONEY MASTERS here:
http://www.poorrichardsalmanac.biz
Learn the truth about the Federal Reserve!
Larry, does that mean CD’s need to be cashed out at maturity?