WASHINGTON – The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.
The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized – and that bank failures were so infrequent – that there was no need to collect the premiums for a decade, according to banking officials and analysts.
Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.
As the comments said in ballon juice; I wonder how they are going to blame this on Obama. It is clear that some idiots live in the US congress, most of whom think like our own short-sighted right-wing government. Words simply fail me in expressing how moronic not pre-planning for a bear economy by the institutions of government is.
Fortunately we had Michael Cullen massively reducing government debt and increasing savings. Of course now the current government wants to raid that cache for mere political reasons rather than looking ahead. But that is the way of plundering merchant banking and bankers