FDIC estimates that about $51 billion in losses will occur as a result of the 177 bank failures to date. Below is a spreadsheet providing details of projected losses by bank. The data is courtesy of Subsidyscope, which conveniently supplies all of its data in open formats. I have prettied it up (just a little), sorted by estimated loss, and provided a total. About 1/5 of the total is for IndyMac Bank.
December 9, 2009
September 25, 2009
September 22, 2009
How should the FDIC be shored up?
FDIC needs some serious shoring up after bailing out 94 banks so far this year. It’s balance sheet now shows some $10 billion in cash vs. about $30 billion at the start of the year. Should it raise cash for future problems by:
a) Raising premiums banks pay?
b) Requiring banks to pre-pay next year’s premiums?
c) Borrowing from Treasury? (can tap $100 billion credit line from Treasury)
d) Borrowing from banks by issuing bonds? (allowed by law after the early 90’s bank meltdown)
Raising premiums on banks will likely put them under greater stress. Pre-paying next year’s premiums seems silly–what happens when there are continued bank failures next year and no premiums coming in? Borrowing from Treasury and the healthy banks seems like the right route here. It avoids putting greater stress on the unhealthy banks and it relies on Treasury (i.e., taxpayers) to shoulder some of the burden (politically unpalatable as this may be). Premiums probably need to go up as well for the sake of FDIC’s future solvency, but raising them right now is a bad idea. FDIC is an absolutely critically important institution, guaranteeing some $4.8 trillion in deposits. Let’s get it back in shape to handle the bank failures still on the horizon.
Update on 9/29/09:
Well, well, FDIC plans to go the silly route…and even sillier than I thought. They will be collecting not only next year’s premiums this year, but also 2011’s. Gee, um, boss, my expenses are higher than expected this year, can I have the next two years pay this year? That would fix everything. This makes no sense.
NYT article here .
