To keep the engine in this fantasy hot-air blimp running, you occasionally have to steal some petrol from the passengers, and then paint "Complaint Office" on the door that leads out to thin air and a 9,500 foot drop. Oh, and you have to borrow a bunch of cash to pay the landing crew.
The U.S. Senate on Wednesday approved a measure to expand a government credit line for the Federal Deposit Insurance Corp in case the agency's reserves prove too small to deal with a growing wave of bank failures.
The legislation would also shield mortgage finance companies from investor lawsuits if those firms ease monthly payments for troubled homeowners.
The FDIC, which guarantees bank deposits, has been able to tap the Treasury Department for up to $30 billion since 1991. That credit line would be increased to $100 billion under the new bill.
Of course, we all hoped that gassing up the FDIC like an Indy 500 pit crew wasn't going to be necessary, but that was a pretty fantastic hope as well.
Look on the bright side: Sure, no one believed that the FDIC's participation in the PPIP's was "riskless," but now that the administration has demonstrated what cooperation with the government means, and a variety of government attorneys have pointed out that salary caps likely will apply to PPIP participants, there really is no risk as there will be no guaranteeing. FDIC cash can, therefore, go where it was meant to go. To backstopping the Treasury's expanding balance sheet. (What? What do you mean that's not what it's for?)
Senate expands credit lines to FDIC reserves [Reuters]