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XMFSinchiruna (26.58)

Next in Line: FDIC needs $150 billion capital infusion for next wave of bank failures



September 25, 2008 – Comments (6)

07:47 FDIC may need $150 bln bailout as local bank failures mount - reports FDIC insures all accounts up to $100,000 at its member banks, and it has never failed to honor a claim. The IndyMac debacle is taking a large bite out of FDIC reserves, and if scores of other banks fail in the year ahead, the fund will be depleted. Taxpayers will have to step in. The FDIC knows which banks are at risk; it has a watch list with 117 institutions. The agency won't disclose their names because doing so could cause depositors to panic and pull out all of their funds. It won't take many more failures before the FDIC itself runs out of money. The agency had $45.2 bln in its coffers as of June 30, far short of the $200 bln Whalen says it will need to pay claims by the end of next year. The U.S. Treasury will almost certainly come to the rescue. Emergency federal funding of the FDIC could swell the cost of government rescues of failed financial institutions to more than $400 bln -- not including the $700 bln general Wall Street bailout now under discussion in Congress. That number would be even higher if the government were on the hook for uninsured deposits -- which amount to $2.6 trillion, 37% of the total of $7 trillion held in the U.S. branches of all FDIC member banks... As recently as March, an internal FDIC memo estimated the cost to cover bank collapses in 2008 would be just $1 bln, dropping to $450 mln in 2009. It wasn't even close. The IndyMac failure alone, which happened four months after that memo was circulated, will cost the FDIC $8.9 bln -- and the bill for all 12 collapses will be about $11 bln, the FDIC says.

6 Comments – Post Your Own

#1) On September 25, 2008 at 10:08 AM, jack21222 (90.80) wrote:

Sometimes it feels like we're skidding down an icy slope. Every time we try to get some footing, it comes out from underneath of us.

It's almost amusing in a sort of sick, twisted way. Have you ever had a day where so many things went wrong, that continued things just seem funny to you? That's what this is like.

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#2) On September 25, 2008 at 10:27 AM, XMFSinchiruna (26.58) wrote:

The economy is one giant Ziggy cartoon.

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#3) On September 25, 2008 at 10:49 AM, clanza875 (34.83) wrote:

What happens when china stops lending us money?

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#4) On September 25, 2008 at 11:16 AM, RainierMan (63.55) wrote:

Imagine the public's reaction after having to cough up a trillion already to save the system. They'll wonder why their tax money continues to not save the system. I suppose that's a trivial matter compared to the macroeconomic effect of all this new debt.

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#5) On September 25, 2008 at 11:40 AM, mysoftballcoach (71.49) wrote:

The FDIC will utilize this new TARP (RTC) for funding.  Once they close a Bank, they will very quickly "Sell" the assets to TARP and replenish the FDIC coffers.  Note that the TARP is not just for Mortgage assets, right.  It was widened to include a variety of assets.

Just my thought, I don't know this for fact.  BTW, Ex-FDIC 86-96.  Bank Liquidation Specialist. 


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#6) On September 25, 2008 at 1:43 PM, AnomaLee (28.79) wrote:


"The economy is one giant Ziggy cartoon."



What happens when china stops lending us money?

The world is going to create more money. Remember that this problem is not isolated to the United States.

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