The “solution” to the FDIC being insolvent is for the US Treasury to loan the FDIC $500 billion (It currently insures around $4 trillion sitting in bank accounts – probably more by now)
The problem with this? The total revenue the FDIC raises by assessing a fee to banks on their insured deposit accounts is $2 billion a year. It takes a long time to pay back $500 billion at $2 billion a year.
To dig the hole deeper, part of the mortgage cram-down bill’s language (probably to blackmail the American Banker’s Association into supporting it) is making the “temporary” insurance limit raise from $100k to $250k per account permanent.
The stupidity and unintended consequences continue.
Tags: bankruptcy, congress, FDIC, Geithner