With all the excitement that banks are having lately – 13 insured banks and savings and loans have failed this year, including two major thrifts – the Federal Deposit Insurance Corporation (FDIC) has decided that they need more money coming in to help shore up the money going out.
As the insurance fund stands (and there apparently is an actual fund), the balance is somewhere around $45.2 billion, which is below the minimum level set by Congress, and the lowest level since 2003.
The FDIC, in their infinite wisdom, has decided that the current rate of 6.3 cents per $100 on deposit is too little. So banks will now have to pay 13.5 cents per $100. Unless the bank is considered in “strong” financial condition (roughly 91 percent of the 8500 banks and thrifts, though there is no mention of how this metric is obtained). In that case, they pay just 11.6 cents per $100 on average.
Apparently the goal of this plan is to shore up that insurance fund, and on the surface it seems like a decent idea – the institutions are putting in nearly twice the amount of money, right?
The only problem with the plan is that it has been in the works for months. Since before the account insurance limit was raised to $250,000 in the bailout legislation recently put into place. This change will probably have an effect on the prior amounts, but it is not going to touch $250,000 per account.
However, our wonderful government has already thought of that. The bailout legislation has given the FDIC unlimited temporary authority to borrow from the Treasury if needed to cover the new limits. Nice.