FDIC had on record only $19 billion in funds at the end of 2008 and with 34 banks that already failed (the latest being BankUnitied that cost the FDIC $4.9 billion), there is no question that the FDIC fund is in a deep trouble.
What’s likely going to happen is that the FDIC will ask for more fees from the banking sector to replenish its funds because more bank failures are expected for the rest of the year even though the government entity can borrow up to $100 billion from the Treasury.
The concern of the FDIC funding levels surged when the latest and biggest bank failure to date, BankUnited, was taken over by the FDIC. The Florida bank had $12.8 billion in assets and $8.6 billion deposits at the time and even though a private equity team agreed to buy the banking operations, the FDIC will still have to cough up close to $5 billion to make up for deposits.
It’s probably going to be a very busy year for the FDIC, but since the entity plays such a crucial role in the whole US banking sector, everyone (banks, governments and all) will do everything in its power (including lending and paying more fees) to let FDIC do its job effectively.
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One reason for this is the fact that years ago, the FDIC cut how much banks had to pay in to the fund under the premise of “everything’s going great, what’s the worst that could happen?”