The FDIC Saves Itself With An Accounting Trick

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How will the FDIC replenish its coffers without Sheila Bair suffering the indignity of groveling in front of Tim Geithner? Clever accounting.

The plan is for the FDIC to require banks to pre-pay three years of assessments. As with everything else in the economy (cash for clunkers, the $8,000 homebuyer tax credit), the idea is to pull it forward.

The FDIC gets the cash now, the banks take a hit — but one that they can expense over three years, as Karl Dnninger points out — and voila, free money.

The FDIC has the cash it needs to keep rescuing failed banks, and nobody was really “bailed out.” And if in the future the FDIC runs low on that cash again, they’ll just assess the banks a few more years worth of fees.

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