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FDIC to consider tapping Treasury to shore up funding needs

Aug 27, 2008 Investment Opinions, Market Outlook

“HONG KONG (MarketWatch) — The Federal Deposit Insurance Corp. is considering a plan to borrow funds from the U.S. Treasury Department, as its seeks to shore up its finances amid an expected wave of bank failures, according to a published report Tuesday. Funds borrowed from the Treasury would used to cover short-term cash-flow needs related to reimbursing depositors in the aftermath of bank failure, the Wall Street Journal reported Tuesday, citing comments by FDIC Chairman Sheila Bair. The report said the borrowed funds would be repaid once assets from the failed bank are sold. “

“…cover short-term cash-flow needs related to reimbursing depositors in the aftermath of bank failure”.

Now should that read as bank “failures”? or “a bank failure”? Obviously the FDIC doesn’t have enough cash to cover deposits and judging from the announcement that the number of banks on the “problem list” is growing, they know some banks are going to fail. I guess it has finally come to the light that banks actually don’t make any money…this Friday should be very interesting…

So the discount window obviously isn’t working and overnight lending (or lending at all) between banks is sqeezing even more? The financial system is approaching the threshold of collapse at a rapid pace…

I thought bank failures are at unusually low levels!
Only 9 this year.
Where are all the funds the FDIC collects from member banks?

The bank failures haven’t even begun yet. There will be a lot of them and some of them will be very big. The FDIC itself will have to be bailed out by the federal government in the not too distant future. The New York Investing meetup will be having a talk on “The 10 banks/brokers most likely to fail” on September 10. For those not in New York, we publish our notes on our website after the meeting.

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Technorati Tags: Aftermath, Bank Failure, Bank Failures, Cash Flow, Collapse, Depositors, Distant Future, Fdic Chairman, Federal Deposit Insurance, Federal Deposit Insurance Corp, Marketwatch, Member Banks, Rapid Pace, Sheila, Threshold, Treasury Department, U S Treasury, U S Treasury Department, Wall Street, Wall Street Journal

Tags: Aftermath, Bank Failure, Bank Failures, Cash Flow, Collapse, Depositors, Distant Future, Fdic Chairman, Federal Deposit Insurance, Federal Deposit Insurance Corp, Marketwatch, Member Banks, Rapid Pace, Sheila, Threshold, Treasury Department, U S Treasury, U S Treasury Department, Wall Street, Wall Street Journal