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Quick Hits: FDIC Groaning Under IndyMac Debt


Brief scrutiny of today's headlines.

The FDIC's takeover of California-based mortgage lender IndyMac may drain as much as 15% from the government's insurance fund.

This could result in higher premiums for all banks. A decision on the increase is expected by the fourth quarter, Bloomberg reports.

The July closure of IndyMac, the nation's third-largest bank failure, may require as much as $8 billion from the FDIC. Another 7 bank closures since August 1 may take another $1.2 billion from the fund, or about 2%.

The FDIC, an independent agency of the U.S. government created in 1933, protects deposits up to $100,000 per customer per bank. A depositor with additional accounts at several banks is covered up to $100,000 per bank. The Certificate of Deposit Account Registry Service -- CDARS, pronounced like the trees -- offers up to $50 million in FDIC coverage through multiple CDs handled by one bank.

The FDIC now lists 90 "problem" banks with combined assets of $26.3 billion. On March 31, the FDIC's insurance fund totaled $52.8 billion.

The FDIC is required to increase the fund when the reserve ratio, or current balance divided by the insured deposits, dips below 1.15%, or is expected to drop below that level in six months. The ratio fell to 1.19% in the first quarter of 2008 from 1.22% in the fourth quarter of 2007.

In 2007, premiums charged banks an average of 5.4 cents per $100 of insured deposits. Troubled banks pay higher rates. The new rate hasn't been determined.

The FDIC insured deposits totaling $4.43 trillion on March 31.

By deposits, Bank of America (BAC) is the nation's largest bank. It's followed by JPMorgan Chase (JPM), Wachovia (WB), Wells Fargo (WFC) and Citigroup (C).
No positions in stocks mentioned.
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