Next to Be Bailed Out: FDIC?

After the U.S. government stepped in to loan hundreds of billions of taxpayer dollars to save sinking financial firms, now it may be the banks' turn to lend a helping hand . . . to Uncle Sam.

The New York Times is reporting that the Federal Deposit Insurance Corporation, which protects the accounts of bank depositors, is running rapidly short of funds after having taken over 94 failed banks so far this year.

That compares to the 25 failed banks taken over by federal regulators in 2008, and 3 that failed in 2007. Souring loans in the commercial real estate market are expected to claim many more in the coming years.

The fund now stands at approximately $10 billion, a third of what it was nine months ago, despite a recent special assessment imposed on banks to replenish the fund.

One option would be to simply raise the assessment paid by all banks (from between $5 to $10 billion over the next six months) to the FDIC, but bankers fear that might push some firms on weak footing over the edge.

Last week Chairwoman Sheila Bair said that she is "considering all options, including borrowing from Treasury" to keep FDIC afloat.

The Times' Stephen Labaton writes that the FDIC chairwoman would be able under the law to simply borrow up to $100 billion from the U.S. Treasury, but is loathe to do so — not least of which to avoid political and public ire over another taxpayer-fueled bailout.

"Sheila Bair would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help," Camden R. Fine, president of the Independent Community Bankers of America, told Labaton.

  • David Morgan

    David Morgan is a senior editor at and