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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

(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.

Treasury Secretary Henry Paulson, center, with his until now little known colleague Shelia Bair.
Treasury Secretary Henry Paulson, center, with his until now little known colleague Shelia Bair.   (AP Photo)
Federal Deposit Insurance Corporation Chairwoman Sheila Bair.
Federal Deposit Insurance Corporation Chairwoman Sheila Bair.   (AP Photo)
Federal Deposit Insurance Corp. (FDIC) Chairwoman Sheila Bair on Capitol Hill.
Federal Deposit Insurance Corp. (FDIC) Chairwoman Sheila Bair on Capitol Hill.   (AP Photo)
Employees of Federal Deposit Insurance Corporation leave the IndyMac Federal Bank headquarters in Pasadena, Calif., after taking control earlier this year.
Employees of Federal Deposit Insurance Corporation leave the IndyMac Federal Bank headquarters in Pasadena, Calif., after taking control earlier this year.   (AP Photo)
Though the Federal Deposit Insurance Corporation is supposed to hold $1.15 for every $100 it insures, it currently has just $1.01.
Though the Federal Deposit Insurance Corporation is supposed to hold $1.15 for every $100 it insures, it currently has just $1.01.   ((c) zieak)
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