FDIC May Need Its Own Bailout

Agency lacks funds to insure present level, much less proposed raise to $250K
By Harry Kimball,  Newser Staff
Posted Oct 2, 2008 1:49 PM CDT
Treasury Secretary Henry Paulson, center, with his until now little known colleague Shelia Bair.   (AP Photo)
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(Newser) – The Federal Deposit Insurance Corporation has quietly and effectively done its job safeguarding Americans’ money since 1933, but the financial crisis will thrust the agency into the spotlight, reports Big Money, Slate’s financial offshoot. The bailout bill increases the amount the FDIC insures, from $100,000 to $250,000, but it appears the agency doesn’t have the cash to make good on its promises.

The FDIC should have $1.15 for every $100 it insures; it only holds $1.01 now. Under the new rules, the agency will likely have to borrow from the Treasury, lest a bank collapse wipe out funds completely. The FDIC has never used its $30 billion credit line; now that credit is unlimited, and another bailout may be on the horizon.