Are there a significant number of banks at risk of failure?
*Associated Press, by Dave Carpenter, October 26, 2009
”Bank failures are expected to cost the fund $100 billion through 2013. The FDIC has asked banks to pay in advance $45 billion in regular premiums that would have been due over the next three years, hoping to avoid or at least delay having to ask the Treasury Department to help replenish the fund.
As the recent spate of bank failures drained the fund, the FDIC also imposed a special one-time fee on the banks earlier this year.
The FDIC can borrow to up to $500 billion from the Treasury — or $100 billion without seeking approval from the Treasury and Federal Reserve. But the FDIC has sought to avoid that partly because of fears it will appear to be another taxpayer bailout.
No matter how the fund is shored up, banks eventually will have to pay higher premiums to cover the costs of the failures.
The FDIC insures deposits at more than 8,000 institutions. The independent agency is backed by the government, and deposits are guaranteed up to $250,000 per account. The FDIC also still has tens of billions in loss reserves apart from the insurance fund.
The 106 bank failures so far this year, including seven announced Friday, are the most since 1992, when 181 failed at the end of the savings and loan crisis. Close to another 400 banks have been deemed at risk of failure.
Comptroller of the Currency John Dugan, who also spoke to the ABA, warned that the pace of bank failures may have slowed but isn’t yet close to ending.
‘We’ve got a ways to go to work through these failures,’ he said.”
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