FDIC may need to borrow money from Treasury (loan, insurance, debt)
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This is not good news. Is it just me or didn't the FDIC make a statement 2 weeks ago that it had plenty of capital for any impending bank failures? What was more interesting is that the next day they announced they were raising premiums on banks to raise more insurance capital and then the next week they revised their estimate for how much IndyMac Bank was going to cost from $8 billion to $8.9 billion. What do you think? FDIC may need to borrow money from Treasury (http://www.businesseconomicsnews.com/story.php?title=fdic-may-borrow-money-from-treasury - broken link)
I think they WILL borrow money from Treasury. They were down to $38b from $53b just last week. Then # 10 came along over the weekend...just a little one, no big deal. But this fall and winter, I expect this whole bank thing to ratchet up considerably.
Lotta folks still on vacation, or still asleep at the wheel. Should be fun.
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank,
So A (as in one) bank failes, and they need to borrow money, what happens if 2-3 banks fail at the same time? (note, the story later says 9 banks have failed, but one in particular obviously is causing a huge problem)
The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.
Meaning, those banks who loan out money for mortgages that are not then sold to Freddie Mae/Mac, thereby putting more pressure on banks to sell their debt to the government
FDIC is nowhere required to insure bank losses at a dollar-for-dollar ratio.
As they run low, they can simply begin to replace insured monies at lower ratios.
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