FDIC Wants Ten Billion Dollars from Biggest Banks

The FDIC is struggling mightily to stay solvent. Given that there are bank failures every Friday, it's no easy feat for it to stay ahead of the game.

Please consider Bank of America, Major Banks’ FDIC Premiums May Top $10 Billion.
 

“The Federal Deposit Insurance Corp.’s plan to rebuild its reserves may cost Bank of America Corp. (BAC) and three of the largest US banks more than $10 billion.

“Bank of America, the biggest US lender by deposits, may owe $3.5 billion under an FDIC proposal that banks prepay three years of premiums, based on the lowest assessment rate multiplied by the bank’s $900 billion in June 30 US deposits.

“ ‘This seems like a very hefty amount,’ said Tim Yeager, a finance professor at the University of Arkansas and former economist at the Federal Reserve Bank of St. Louis. ‘The FDIC’s projections of future losses are pretty severe, and they are trying everything they can to avoid tapping the Treasury.’

“US bank premiums range from 12 cents per $100 in deposits for the safest lenders to 45 cents for banks the US considers risky, said Chris Cole, senior regulatory counsel for the Independent Community Bankers of America. The FDIC yesterday proposed asking banks to pay premiums for the fourth quarter and next three years on December 30. The fees will raise $45 billion.

“Based on the current assessment and each bank’s deposits, Wells Fargo & Co.’s (WFC) fee may be $3.2 billion based on its $814 billion in deposits, JPMorgan Chase & Co. (JPM) may pay $2.4 billion and Citigroup Inc. (C) $1.2 billion. The estimates exclude the FDIC’s plan to boost the assessment rate by 3 cents per $100 in deposits in 2011 or the agency’s assumption that bank deposits will increase by 5 percent annually."

FDIC Is Bankrupt

Last month, I wrote As of Friday August 14, 2009, FDIC is Bankrupt.

Although that’s a realistically correct headline (Please see You Know The Banking System Is Unsound When... for a justification), I did overlook things the FDIC did to temporarily stay in the game.

Prepaid fees are yet another attempt to keep the game going. How much longer this can last is anyone's guess. Those prepaid fees are going to hurt bank earnings, 100% guaranteed. The fees may even push some struggling banks into bankruptcy.

Emails from a Bank Owner Regarding FDIC

With regards to my post on FDIC bankruptcy, I received Emails from a Bank Owner regarding FDIC and Under-Capitalized Banks,