Deposit Insurance Fund, UNoffcially

December 18, 2009

I was heading out for Thanksgiving vacation when FDIC released the quarterly banking profile, so I wasn’t able to update an important chart: Total Insured Deposits, Unofficially…..


(ht Stephen Culp)

When the world was falling apart, FDIC increased deposit insurance limits….to $250,000 for individual non-retirement accounts and unlimited for business transaction accounts. But those increases were treated as “temporary” and so left out of FDIC’s total.

Since the $250,000 limit was extended to 2013 — decidedly not “temporary” — FDIC started collecting that data from its member banks. The data was published for the first time in Q3.

So in Q3, the official figure — which includes $250k limits — jumped from $4.8 trillion to $5.3 trillion. Throw in the $761 billion insured by the transaction account guarantee program and you’ve got a total of $6.1 trillion of insured deposits. Compare to Q3 ’08. Back then, before all the emergency measures, the total was $4.5 trillion. So the increases added $1.6 trillion, or 34%, to the total.*

I’ve juxtaposed that with the reserve balance on the Deposit Insurance Fund. It’s now negative, though that doesn’t mean FDIC is out of cash. And they’ve got another $45 billion coming this quarter, but for accounting reasons the reserve will still be listed as negative.**

But even with that cash coming in, the FDIC’s resources are under a lot of pressure. With 552 banks and $346 billion in assets on the “problem” list, FDIC will struggle to pay its bills.

Sheila will have to increase assessments on banks at some point, or start drawing on FDIC’s credit line at Treasury…


*The transaction account guarantee program is scheduled to expire in June of next year.

**The $45 billion to be collected isn’t a “special” assessment, it’s front-loading three years of “regular” assessments. The distinction is crucial. Since these assessments are regular, banks can treat them as a prepaid expense on their balance sheet, i.e. as an asset to be drawn down quarterly. That means they only have to draw down capital quarterly. The flip side is that FDIC can’t count the $45 billion as revenue. It has to treat it as “deferred revenue.” Deferred revenue is a liability on the balance sheet. Normally an assessment counts as revenue, which is added to the DIF’s equity balance.

Don’t you just love accounting?


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[…] next year could cripple the FDIC’s wounded reserve fund. As the chart below shows (via Rolfe Winkler), their reserves aren’t pretty. Don’t worry about bank runs, though. The real concern […]

Posted by FDIC Bank Closings May Rise in 2010 | Report as abusive

Not to sure where the USA insurance companies stand on disputing a genuine claim on the grounds

of not disclosing information whether it is relevent or not like the UK insurance companies do and the

sad thing is for many policy holders is that they are entitled to do so in the law that stands at the

moment. Some of the UK laws go back to 1906 and have never been amended to stay up todate with

the current times on this massive industry.

Posted by insurance | Report as abusive

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Posted by Chain Bridge Investing: Financial and Stock Investing News for 12-21-09 : The Guest List VIP | Report as abusive

The FDIC is broke, and the US treasury is beyond empty.

Goldman Sachs, JP Morgan Chase, along with the federal reserve have stolen trillions from the taxpayer without so much as an independent audit.

The US media has betrayed their audience to benefit their banking masters.

Over $2 trillion of US treasuries need to be sold or rolled over in the next year.

We have a criminal who has done nothing to restore confidence or the economy.

You won’t catch me with my money in a US bank.

The US has become so corrupt it can’t even function anymore, and we have that bank puppet Harry Reid selling out our children with his health control bill.

The dollar one way or another will collapse within five years. Bank on it!

Posted by WM Kirby | Report as abusive

“””””Sheila will have to increase assessments on banks at some point, or start drawing on FDIC’s credit line at Treasury…””””


Posted by CATHERINE | Report as abusive

US deposit insurance should be modified to be slightly more like the UK’s with “coinsurance” by depositors. Account balances over a certain threshold (perhaps $15,000) would only be partially insured. Perhaps more than the 90% insurance that the UK gov’t offers, but something less than 100%. If US depositors had to worry about losing 2% of their deposits, they would be more careful about which banks into which they would deposit their money. Might this increase the odds of runs on banks? Absolutely. But should banks be able to operate utterly unhindered by depositors’ concerns about bank stability? Absolutely not. As it is, we have federally insured banks bringing in “hot money” deposits until the instant when they become insolvent. This has happened with Indy Mac Bank, Countrywide Bank, Corus Bank and General Motors Bank, er, Ally Bank, I mean. The bank that pays the highest interest yield today is usually the one take over by the FDIC tomorrow. No surprise there. Unsafe business practices are currently promoted & insured by the federal government. Furthermore, small banks’ insurance fees are raised in part to subsidize the banks that undertake overly risky practices.

Admittedly, many depositors are not capable of assessing bank stability. A 2% haircut over $15k wouldn’t kill them, though, and the status quo is worse. Especially for taxpayers. A run on an unstable bank does two things: Kill the bank dead and reduce the FDIC’s (taxpayers’) exposure. Both of those are good things.

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