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F.d.i.c. May Borrow Funds From Banks

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http://www.nytimes.com/2009/09/22/business...mp;ref=business

Tired of the government bailing out banks? Get ready for this: officials may soon ask banks to bail out the government.

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. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.

A hallmark of the financial crisis has been the decision by successive administrations over the last year to lend hundreds of billions of taxpayer dollars to large and small banks.

“It’s a nice irony,†said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting company. “Like so much of this crisis, this is an issue that involves the least worst options.â€

Bankers and their lobbyists like the idea because it is more attractive than the alternatives: yet another across-the-board emergency assessment on them, or tapping an existing $100 billion credit line to the Treasury.

The Federal Deposit Insurance Corporation, which oversees the fund, is said to be reluctant to use its authority to borrow from the Treasury.

Under the law, the F.D.I.C. would not need permission from the Treasury to tap into a credit line of up to $100 billion. But such a step is said to be unpalatable to Sheila C. Bair, the agency chairwoman whose relations with the Treasury secretary, Timothy F. Geithner, have been strained.

“Sheila Bair would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help,†said Camden R. Fine, president of the Independent Community Bankers. “She’d do just about anything before going there.â€

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 that could open the industry to a political reaction, resulting in a wave of restrictions like fresh limits on executive pay.

Any populist furor could be avoided, the thinking goes, if the government borrows instead from the banks.

“Borrowing from healthy banks, instead of the Treasury, has the advantage of keeping this in the family,†said Karen M. Thomas, executive vice president of government relations at the Independent Community Bankers of America, a trade group representing about 5,000 banks. “It is much better for perceptions than having the fund borrow from somewhere else.â€

Ultimately, officials say, the deposit insurance corporation could settle on a plan that replenishes the insurance fund by doing some of both: borrowing from healthy banks to shore up the shorter-term liquidity needs of the fund, and imposing a special fee on banks to increase the longer-term capital level of the fund.

Since January the F.D.I.C. has seized 94 failing banks, causing a rapid decline in the deposit insurance fund. Despite a special assessment imposed on banks a few months ago to keep the fund afloat, its cash balance now stands at about $10 billion, a third of its size at the start of the year. (Another $32 billion has been set aside for failures that officials expect to occur in the coming months.)

No wonder the bankers are liking this idea, they can see the massive interest payments coming there way. There's no mention in the article as to where the money is going to come from to fund the interest payments on these loans.

Perhaps that will require a bank loan as well.

This plan is clear genius.

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trouble is, banks are only publicy healthy because they LIE about their valuations of assets.

FDIC shouldn't need ANY money in a failed bank as their job is to stop the failure as it approaches.

its when they do this they discover the assets holding the bank up cant be sold.....

so the fracking banks have the barefaced cheek to LEND to the FDIC....its another scam, backed by the US government.

EDIT for clarity

Edited by Bloo Loo

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http://www.nytimes.com/2009/09/22/business...mp;ref=business

No wonder the bankers are liking this idea, they can see the massive interest payments coming there way. There's no mention in the article as to where the money is going to come from to fund the interest payments on these loans.

Perhaps that will require a bank loan as well.

This plan is clear genius.

:lol::lol:

where is that picture of a snake eating itself

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