FDIC Insurance Fund Still $20 Billion in the Hole

Greg Hunter
USAWatchdog.com

• A d v e r t i s e m e n t

While the stock market was beginning its 376 point plunge yesterday, the Federal Deposit Insurance Corporation was quietly putting the best face it could on a banking system in serious trouble.  In a press release to update the status of the insurance fund, the big positive headline was, “FDIC-Insured Institutions Earned $18 Billion in the First Quarter of 2010–Net Income Highest in Two Years.” FDIC Chairman Sheila C. Bair said, “There are encouraging signs in the first-quarter numbers . . . Industry earnings are up. More banks reported higher earnings, and fewer lost money.” (Click here for the complete FDIC press release.)

I can appreciate Chairman Bair’s positive attitude, but “encouraging signs” do not mean we have turned the corner and brighter days are ahead.  The Deposit Insurance Fund, or DIF, has a negative balance of -$20.7 billion.  That is just a $200 million improvement from the all time record deficit of -$20.9 billion at the end of 2009.  I don’t see how these numbers are “encouraging.”

I talked with FDIC spokesman David Barr yesterday about the shortfall in the DIF.  He said, “The FDIC is not broke.” It has an additional “$63 billion in cash.” He told me there is about $46 billion in three years of prepaid deposit insurance premiums and an additional $17 billion in cash for a grand total of $63 billion in “liquid resources” to close insolvent banks.  Let me get this straight–nearly 75% of the FDIC’s bailout money is from fees collected up front.  What happens when the FDIC burns through that?  Will they collect another 3 years of fees?

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This article was posted: Friday, May 21, 2010 at 11:37 am

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