Deposit Insurance Fund, UNoffcially
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?