Comments on: The FDIC plays hide the ball too http://blogs.reuters.com/commentaries/2009/08/28/the-fdic-plays-hide-the-ball-too/ Now raising intellectual capital Sun, 08 Nov 2015 08:31:30 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: ric http://blogs.reuters.com/commentaries/2009/08/28/the-fdic-plays-hide-the-ball-too/comment-page-1/#comment-3136 Fri, 28 Aug 2009 15:17:57 +0000 http://blogs.reuters.com/commentaries/?p=3228#comment-3136 Making the assumption that dozens of more banks will fail and the FDIC fund will become depleted, in the event the Fund chooses to draw down on its line of credit with the U.S. Treasury, where does the U.S. Treasury derive its funds from? The bond market? From foreign investors. So, given the line of credit is derived from more Federal debt, the FDIC backstop comes from the backstop of foreigners willing to lend the U.S. money. To say that the FDIC can increase the fees banks pay to support the FDIC fund is fine, but there is a limited supply of capital available. If you take it out of one pigeon hole you have to put more in the other. Ultimately all the pigeon holes have to be covered and they are curently covered by the Federal debt which is covered by foreign investors who buy U.S. bonds. So the FDIC is no longer backstopped by the American people, it is backstopped by foreign investors. It is amazing that the people at the FDIC repeat the same lines over and over again, ” no one has ever lost a penny.” That may be true, but moving forward are they speaking the entire story or are they speaking in a “gov-speak” vacuum, repeating the FDIC lingo they are supposed to repeat to the American public. It’s not the FDIC’s problem to manage the deficit, true, but they are doing a disservice to the American depositor when they speak in a vacuum. Shelia Bair should be screaming her head off at Geithner, the President and the U.S. Congress to get their act in order before the American depositors get very nervous about the safety and soundness of the American depositary system. These monies represent the work of millions of hardworking American savers who lend their money to the American banking system so that the banks can make good loans to good citizens and good corporations. Isn’t that the foundation the American banking system is suppossed to bebuilt upon?

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