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Monday, September 21, 2009

Banks to Make Loans to FDIC?

by Calculated Risk on 9/21/2009 10:24:00 PM

From the NY Times: F.D.I.C. May Borrow Funds From Banks (ht RJ)

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. ...

Bankers and their lobbyists like the idea ... The Federal Deposit Insurance Corporation, which oversees the fund, is said to be reluctant to use its authority to borrow from the Treasury.
Bankers worry that a special assessment of $5 billion to $10 billion over the next six months would crimp their profits and could push a handful of banks into deeper financial trouble or even receivership. And any new borrowing from the Treasury would be construed as a taxpayer bailout ...

Officials say that the F.D.I.C. will issue a proposed plan next week to begin to restore the financial health of the ailing fund.
Of course healthy banks would be happy to lend money to the FDIC; it is completely risk free and backed by the Treasury (and taxpayers).