Bankruptcy

Banks to Bail Out FDIC?

By mcbride

In yet another interesting twist, there is now a proposal floating about that would have the big banks bail out the FDIC.   ?Senior regulators say they are seriously considering a plan to have the nation?s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks?. ?It?s a nice irony,? said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting company. ?Like so much of this crisis, this is an issue that involves the least worst options.?

Bankers and their lobbyists like the idea because it is more attractive than the alternatives: yet another across-the-board emergency assessment on them, or tapping an existing $100 billion credit line to the Treasury.

The Federal Deposit Insurance Corporation, which oversees the fund, is said to be reluctant to use its authority to borrow from the Treasury.

 Here is a link to this interesting article: http://www.nytimes.com/2009/09/22/business/22bailout.html?_r=2

 Michael

Full post as published by Texas Lawyer Blog on September 22, 2009 (boomark / email).