Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

FDIC Seeks 500 Billion Loan


Drained by bank failures, insurance fund says it's that or higher fees


A bill before Congress would allow the Federal Deposit Insurance Corp. to borrow up to $500 billion from the US Treasury.

The measure, supported by Democratic Senator Christopher Dodd, of Connecticut, and chairman of the Senate Banking Committee, would help the FDIC rebuild the fund that insures individual bank deposits.

Earlier this week, FDIC Chairman Shelia Bair proposed new bank fees that could raise as much as $27 billion this year.

The fund dropped to $18.9 billion in the fourth quarter from $34.6 billion in the previous quarter due to 25 bank failures.

The proposal to raise fees immediately drew criticism. The Independent Community Bankers of America said the new assessments could swallow 50% to 100% of some bank's 2009 earnings.

If Dodd's bill becomes law, it would represent an alternative to higher FDIC fees charged to member banks.

The bill would permit the FDIC to borrow as much as $500 billion until the end of 2010 if the FDIC, Federal Reserve, Treasury secretary and President Barack Obama agree the money is needed. The bill would permit the FDIC to borrow as much as $100 billion without such approval.

A 1991 law permits the FDIC to draw on a $30 billion line of credit at the US Treasury. The FDIC hasn't tapped the credit line in about 10 years but the amount may be too small to handle bank failures in the current downturn.

Congress has temporarily increased FDIC coverage to $250,000 from $100,000 per depositor through December 31.

The Certificate of Deposit Account Registry Services – CDARS, or "cedars" like the trees – provides up to $50 million FDIC coverage through multiple CDs split into amounts below the FDIC limit and divided among member banks to ensure full coverage. However, all paperwork is handled at one bank and this saves you running around town and dealing with several banks to keep your CDs below the threshold for FDIC coverage.

CDARS is a deposit-placement service offered through Promontory Interfinancial Network. It's designed to help community and regional banks attract and retail large deposits. CDARS is available through about 3,000 banks in all 50 states and the District of Columbia. In general, major banks don't offer CDARS.

< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos