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Thread: Now-needy FDIC collected little in premiums

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    Now-needy FDIC collected little in premiums

    Now-needy FDIC collected little in premiums
    With fund going strong, banks didn't pay for decade

    By Michael Kranish
    Globe Staff / March 11, 2009


    WASHINGTON - The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.

    The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.

    Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.

    To possibly reduce the fee increase, the FDIC has asked Congress for the temporary authority to borrow as much as $500 billion from the US Treasury - up from the current $30 billion limit - in case the number of bank failures increases even more dramatically. If Congress approves the measure, to borrow more than $100 billion, the FDIC would still need permission from the Federal Reserve, the Treasury Department, and the White House.

    As of Dec. 31, the FDIC had $18.9 billion in its insurance fund - down from $52.4 billion a year earlier - in addition to $22 billion that it has set aside for pending bank failures. The agency has projected it will need $65 billion to take over failed banks through 2013.


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    Re: Now-needy FDIC collected little in premiums

    I read this yesterday and it seems shockingly stupid

    But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts
    The bank insurance program was predicated on the assumption that nothing bad would ever happen to banks

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    Re: Now-needy FDIC collected little in premiums

    Gee - and I always thought the fund was designed to have a surplus fund to PREPARE for situations like we are facing now.
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    Re: Now-needy FDIC collected little in premiums

    Quote Originally Posted by Kernel Sanders View Post
    I read this yesterday and it seems shockingly stupid



    The bank insurance program was predicated on the assumption that nothing bad would ever happen to banks
    Chicken Little is vindicated, the sky IS falling....
    anything can happen in the world of high finance. lots of money being handled by too many who are too weak to fight the urge to steal some of it...
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