With a clip of 4 or 5 bank failures per week — a few of which aren’t so tiny — the FDIC’s reserves are dwindling.
WSJ: For the 102 banks that have collapsed in the past two years, the FDIC’s estimated cost averaged 25% of assets. That is up from the 19% rate between 1989 and 1995, when 747 financial institutions were closed by regulators, according to the FDIC.
The agency’s insurance fund already has dipped to $13 billion, with more than 300 battered banks and thrifts still on an undisclosed FDIC list of problem institutions.
That’s an interesting point about the increase in costs-per-failure. These banks aren’t just insolvent, they’re massively insolvent.
Asof the FDIC being down to $13 billion — yeah, that’s bad, especially if there are a few more Colonials out there. On the other hand, Congress will replenish the FDIC instantly, and we don’t think that’d be remotely controversial. Insuring main street deposits is something that only the most hardcore goldbugs, who think all fractional reserve lending is scandalous, will have a problem with.
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