FDIC May Borrow Billions From Banks

Tapped-out deposit insurance fund mulls reverse bailout

By Jason Farago, Newser Staff

Posted Sep 22, 2009 6:37 AM CDT

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FDIC May Borrow Billions From Banks — Former IndyMac depositors, many who lost their savings, demonstrate on the one-year anniversary of the Federal Deposit Insurance Corp. (FDIC) takeover of the IndyMac Bank in Irvine, Calf. (AP Photo/Nick Ut)

After a year of government bailing out the banks, now the banks may bail out the government. Regulators are considering a plan for the FDIC, which protects bank depositors, to borrow billions from healthy banks, enabling the fund to refresh its accounts after a wave of bank failures. Banks and their lobbyists are strongly in favor; writes the New York Times. They'd rather loan the cash than get tapped for up to $10 billion in special assessments.

"Borrowing from healthy banks, instead of the Treasury, has the advantage of keeping this in the family," said an exec with a bankers' trade group. Another appeal of a bank-backed loan: Sheila Bair, the head of the FDIC, has a famously antagonistic relationship with Tim Geithner and is loath to ask the Treasury for help. "She would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help," one banker joked.
(More FDIC stories.)

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