FDIC Considering Plan To Borrow Money From Healthy Banks

The NY Times reported that regulators are seriously considering a plan where the nation’s healthy banks would lend billions of dollars to help increase the insurance fund's reserves. This would allow the FDIC, which is running out of money to continue to rescue the sickest banks.

Bankers think the idea is good because they'd be lending the FDIC money rather than having an assessment or fee levied on all the banks. Bankers worry that a special assessment of $5 billion to $10 billion over the next six months would hurt their profits and could push a handful of banks into deeper trouble.

“Borrowing from healthy banks, instead of the Treasury, has the advantage of keeping this in the family,” Karen M. Thomas, executive vice president of government relations at the Independent Community Bankers of America, a trade group representing about 5,000 banks, told The Times. “It is much better for perceptions than having the fund borrow from somewhere else.”

The FDIC could end up on doing a mixture of both plans: borrowing from healthy banks in the short-term and implementing a special fee to increase the longer-term capital level of the fund.