With thanks to Guest!
Open Letter to Bloomberg News about FDIC Deposit Insurance Fund
FOR IMMEDIATE RELEASE
September 25, 2008
Mr. John McCorry
Executive Editor
Bloomberg News
Dear Mr. McCorry:
Bloomberg reporter David Evans' piece ("FDIC May Need $150 Billion Bailout as Local Bank Failures Mount," Sept. 25) does a serious disservice to your organization and your readers by painting a skewed picture of the FDIC insurance fund. Let me be clear: The insurance fund is in a strong financial position to weather a significant upsurge in bank failures. The FDIC has all the tools and resources necessary to meet our commitment to insured depositors, which we view as sacred. I do not foresee - as Mr. Evans suggests - that taxpayers may have to foot the bill for a "bailout."
Let's look at the real facts about the FDIC insurance fund.
The fund's current balance is $45 billion - but that figure is not static. The fund will continue to incur the cost of protecting insured depositors as more banks may fail, but we continually bring in more premium income. We will propose raising bank premiums in the coming weeks to ensure that the fund remains strong. And, at the same time, we will propose higher premiums on higher risk activity to create economic incentives for poorly managed banks to change their risk profiles. The fund is 100 percent industry-backed. Our ability to raise premiums essentially means that the capital of the entire banking industry - that's $1.3 trillion - is available for support.
Moreover, if needed, the FDIC has longstanding lines of credit with the Treasury Department. Congress, understanding the need to ensure that working capital is available to the FDIC to provide bridge funding between the time a bank fails and when its assets are sold, provided broad authority for us to borrow from Treasury's Federal Financing Bank. If necessary, we can potentially raise very large sums of working capital, which would be paid back as the FDIC liquidates assets of failed banks. As per our authorizing statute, any money we might borrow from the Treasury must be paid back from industry assessments. Only once in the FDIC's history have we had to borrow from the Treasury - in the early 1990s - and that money was paid back with interest in less than two years.
Finally, Mr. Evans' suggestion that the "government" could ever be "on the hook for uninsured deposits" demonstrates a misunderstanding of FDIC insurance. To protect taxpayers, we are required to follow the "least cost" resolution, which means that uninsured depositors are paid in full only if this is the least costly option for the FDIC. This usually occurs when a bidder for the failed bank is willing to pay a higher price for the entire deposit franchise. We are authorized to deviate from the "least cost" resolution only where a so-called "systemic risk" exception is made. This is an extraordinary procedure which we have never invoked. And again, any money we borrow from the Treasury Department must be repaid through industry assessments.
I am confident in the strength of the FDIC's resources to make good on our sacred pledge to insured depositors. And, remember, no depositor has ever lost a penny of insured deposits, and never will.Andrew Gray
Director
Office of Public Affairs
Federal Deposit Insurance Corporation
Posted by guest , Sep 25, 2008 3:41PM
Cliff notes version:
We can suck money outta Uncle Sugar even easier than Goldman Sachs, so fuck you, fuckball.
Posted by guest , Sep 25, 2008 3:42PM
Wow. Booyah.
Posted by guest , Sep 25, 2008 3:47PM
"The fund is 100 percent industry-backed. Our ability to raise premiums essentially means that the capital of the entire banking industry - that's $1.3 trillion - is available for support"
So...the FDIC is ultra-ultra senior and can suck capital out of banks as they feel fit?
Posted by Booger , Sep 25, 2008 3:48PM
Sounds like FDIC is taking some cues from the bond insurance playbook. Suck it, critics.
Posted by Booger , Sep 25, 2008 3:49PM
Sounds like FDIC is taking some cues from the bond insurance playbook. Suck it, critics.
Posted by guest , Sep 25, 2008 3:52PM
#3...no. Examiners make assessments against banks on a risk based approach -the more riskier the higher premium you pay - much like an insurance policy.
Assessments will be going up as examiners make there new rounds. Right now its, i think currently its on average $47 per $10,000 in deposits (or could be assets)...
Posted by guest , Sep 25, 2008 3:54PM
Bess - where's my hat tip for posting this link in an earlier post! C'mon don't do me dirty.
Posted by guest , Sep 25, 2008 4:03PM
that's a bitch slap for a bitch
Posted by diablo , Sep 25, 2008 4:06PM
Watch out since Bank Failure Friday is tomorrow (after hours). Waaaaaaaah!
Posted by guest , Sep 25, 2008 4:08PM
Isn't this the FDIC version of the CNBC apperance of all these CEO's (BSC, LEH, AIG, FRE FNM,) just prior to their demise?
The FDIC has to post this letter ahead of the failure of WaMu (probably tomorrow).
After Bush's speech last we must be on the verge of a real "run on the banks". WaMu's failure will bring that event to fruition.
For SEC purposes i have heard no rumor nor am i a passing a rumor on, about the status, past, current, or future of WaMu or any of its affliates. The information contained herein is purely my opinion. Any action taken by another reader based on my opinion proves that they are as stupid as i.
Posted by guest , Sep 25, 2008 4:10PM
"We are authorized to deviate from the 'least cost' resolution only where a so-called 'systemic risk' exception is made. This is an extraordinary procedure which we have never invoked."
-Andrew Gray, 9/25/08
"This is an extraordinary period for America's economy . . . . But these are not normal circumstances. The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down."
-George W. Bush, 9/24/08
Posted by guest , Sep 25, 2008 4:26PM
Bess, @7 here...thanks boo.
Posted by guest , Sep 25, 2008 4:29PM
@ 11
yeah, we're fux0red
Posted by pdtrading , Sep 25, 2008 4:40PM
OK, does anyone actually believe anybody from the government anymore? I'm sorry, but the FDIC can suck it.
Posted by guest , Sep 25, 2008 4:44PM
Well, we'll find out how this works tomorrow, most likely.
Posted by guest , Sep 25, 2008 4:45PM
@14...than go put your money under your mattress...loser.
Posted by guest , Sep 25, 2008 4:51PM
Hi everyone!! just got here from AOL's "Nothing Wrong With the Financial Industry" chat room!
What's the topic??
Posted by guest , Sep 25, 2008 5:17PM
Bloomberg News is a piece of shit. It's by far the most biased site, constantly sucking Obama's cock.
Posted by guest , Sep 25, 2008 5:48PM
Bloomberg reporters talking about financial markets make as much sense as Amish people talking about technology.
Posted by guest , Sep 26, 2008 9:54AM
Don't diss bloomberg news. It's my daily dose of entertainment.