More on the FDIC and their need for cash….
I wrote last week that we had a sign that the World Was Coming to an End.
Now it appears that we are seeing a little more sense of “normalcy.” What’s happened?
- The FDIC is still running out of money.
- Rather than wanting to borrow money from the banks, they are looking at a different option. They are basically saying, “Give us three years worth of fees now so that we can afford to bail out your competitors.”
Is it a good thing? Nope, it’s still not a pretty situation, but it’s a solution to the situation that won’t have nearly as many long term unintended consequences.
Stay tuned, we aren’t done hearing more about this……..
Tom Vanderwell
FT.com / Companies / Financial Services – FDIC considers calling for bank advances
US banks will have to advance tens of billions of dollars to the cash-strapped fund protecting depositors at the Federal Deposit Insurance Corporation under a proposal to be to be put forward by regulators on Tuesday.Sheila Bair, FDIC chairman, has said the agency is considering “all options’’ to restore the fund, including tapping its credit line with the US Treasury of up to $500bn, imposing emergency fees on banks and asking banks to pre-pay industry fees.
The FDIC’s board, which meets on Tuesday to discuss options, is currently leaning towards asking banks to pay three years’ worth of its fees in advance, say people briefed on the discussions. For 2009, banks are set to pay an annual fee of about $12bn and a one-off emergency charge of $5.6bn.
The plan would allow the agency to get the cash it needs now while allowing the banks to avoid another big one-off charge. The banks would not have to recognise the charges on their balance sheets until the quarter when the fees were due.
