Premiums to put FDIC back in black

Mitchell Hartman Dec 30, 2009
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Premiums to put FDIC back in black

Mitchell Hartman Dec 30, 2009
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Stacey Vanek-Smith: Starting today, The Federal Deposit Insurance Corporation will be getting some money back. The FDIC’s deposit insurance fund, which insures our bank deposits, is billions in the red after 140 bank failures this year. But that’s changing, as Mitchell Hartman reports.


Mitchell Hartman: The FDIC’s insurance fund protects deposits up to $250,000, and it’s paid for by premiums charged to banks. Today, those premiums come due. Not just for a quarter, but for the next three years, in one lump-sum.

Erik Oja is a bank analyst at Standard and Poors:

Erik Oja: They need the cash, simply because the fund has diminished.

Andrew Gray of the FDIC says it’s worse than that:

Andrew Gray: As of September 30, the fund stood at negative $8.2 billion.

Gray says this three-year prepayment plan will raise $45 billion, putting the fund back in the black.

Some banks have complained paying all at once will hurt their ability to lend. Erik Oja says that’s not likely. The bigger problem is finding good loan risks in this poor economy. Plus, he says, banks got a break when times were good.

Oja: For almost 10 years, the industry paid very little or nothing in premiums, and got a free ride.

Small banks can request an exemption, though doing so could signal their finances aren’t strong enough to survive the coming year.

I’m Mitchell Hartman for Marketplace.

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