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OfflineMrBump
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Congress did not authorize the FDIC to collect premiums from 1996 through 2006
    #9960897 - 03/12/09 10:13 PM (12 years, 7 months ago)

Now, what's easily lost in the article is that Congress mandates the insurance fund must stay between 1.15 percent and 1.5 percent of all insured deposits. From 1996 through 2006, when Congress would not authorize the FDIC to do its job and collect premiums from 95% of banks, the income made on the interest from what was already present in the fund was enough to keep it in this range if 1.15 and 1.5%.

Still, these insurance premiums aren't paid to protect the bank itself, they are paid to protect my (and your) account deposits. I read somewhere that the premiums range from 12 to 14 cents for every 100 dollars held in deposit at the bank. I dont know the credibility of that number, nor do I know if its collected yearly, quarterly, or whenever. But that could be a substantial reoccurring fee to one of the many giant banks in this country. A fee that they could just ask their buddies in Congress to waive when the times were good.

How's that fable about the two squirrels collecting nuts for winter go, again?

http://www.boston.com/news/nation/washington/articles/2009/03/11/now_needy_fdic_collected_little_in_premiums/?page=full?ref=fp1

Quote:



Now-needy FDIC collected little in premiums
With fund going strong, banks didn't pay for decade
By Michael Kranish
Globe Staff / March 11, 2009

 
WASHINGTON - The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.

The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.

Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.

To possibly reduce the fee increase, the FDIC has asked Congress for the temporary authority to borrow as much as $500 billion from the US Treasury - up from the current $30 billion limit - in case the number of bank failures increases even more dramatically. If Congress approves the measure, to borrow more than $100 billion, the FDIC would still need permission from the Federal Reserve, the Treasury Department, and the White House.

As of Dec. 31, the FDIC had $18.9 billion in its insurance fund - down from $52.4 billion a year earlier - in addition to $22 billion that it has set aside for pending bank failures. The agency has projected it will need $65 billion to take over failed banks through 2013.

But if the FDIC suddenly had to take over a giant bank such as Citigroup or Bank of America, the fund would be drained "in a flash," said Cornelius Hurley, director of the Boston University law school's Morin Center for Banking and Financial Law.

Last week, FDIC chairwoman Sheila Bair wrote to Senate Banking Committee chairman Christopher Dodd, a Connecticut Democrat, that her agency could need more money because the existing fund "provides a thin margin of error" given the government's responsibility "to cover unforeseen losses." The March 5 letter, provided to the Globe, said the additional borrowing authority is necessary to "leave no doubt" that the FDIC can "fulfill the government's commitment to protect insured depositors against loss."

Bair said yesterday that the agency's failure to collect premiums from most banks "was surprising to me and of concern." As a Treasury Department official in 2001, she said, she testified on Capitol Hill about the need to impose the fees, but nothing happened. Congress did not grant the authority for the fees until 2006, just weeks before Bair took over the FDIC. She then used that authority to impose the fees over the objections of some within the banking industry.

"That is five years of very healthy good times in banking that could have been used to build up the reserve," Bair, a former professor at the University of Massachusetts at Amherst, said in an interview. "That is how we find ourselves where we are today. An important lesson going forward is we need to be building up these funds in good times so you can draw down upon them in bad times."

Hurley agreed with Bair's analysis of the FDIC's dilemma. "Typically you would build up a reserve during the halcyon days to protect yourselves during a recession," he said, calling the decision to stop collecting most premiums "a political one" that was pushed by banks and not based on strict accounting principles.

But James Chessen, chief economist of the American Bankers Association, said that it made sense at the time to stop collecting most premiums because "the fund became so large that interest income on the fund was covering the premiums for almost a decade." There were relatively few bank failures and no projection of the current economic collapse, he said.

"Obviously hindsight is 20-20," Chessen said.

House Financial Services Committee chairman Barney Frank agreed that officials believed at the time that the good times would last and that bank failures would not be a problem.

"We had this period where we had no failures," the Massachusetts Democrat said in an interview yesterday. "The banks were saying, 'Don't charge us anything.' "

Last October, to help restore confidence during the financial meltdown, Congress and then-President Bush agreed to raise the insured amount from $100,000 to $250,000 per depositor until Dec. 31, 2009. A small portion of the new fees on banks will go toward supporting that increase.

The FDIC has never failed to make good on its promise to pay for the insured deposits when a bank fails, and officials said that will not change. The fund ran short of money during the savings and loan crisis of the 1980s, prompting the agency to increase fees to make up for the shortfall.

Then, a booming economy left banks flush with cash, and by 1996 the insurance fund was considered so large that it could grow through interest payments and fees charged only to banks with high credit risk. Congress agreed that premiums didn't need to be collected if the fund was sustained at a level that was considered safe. Thus, about 95 percent of banks paid no premiums from 1996 to 2006, including some new ones that did not have to pay a premium, the FDIC said.

Congress mandates that the insurance fund must stay between 1.15 percent and 1.5 percent of all insured deposits. The reserve ratio on Dec. 31 was 0.40 percent, down from 1.22 percent at the end of 2007. The FDIC has increased premiums to increase the reserve ratio, as well as proposing a one-time emergency assessment that could raise as much as $15 billion.

Globe correspondent Jillian Jorgensen contributed to this report.
© Copyright 2009 Globe Newspaper Company.





--------------------
If it weren't for the bloody corpses, I wouldn't have any corpses at all.

There are two ways to get to the top of an oak tree: start climbing or sit on an acorn.

Are you a carrot, an egg, or a coffee bean?


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Offlinelonestar2004
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: MrBump]
    #9961130 - 03/12/09 10:54 PM (12 years, 7 months ago)

so is the money in my bank account is not insured?


--------------------
America's debt problem is a "sign of leadership failure"

We have "reckless fiscal policies"

America has a debt problem and a failure of leadership.

Americans deserve better

Barack Obama


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Invisiblepinkfloydms
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Registered: 05/27/04
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: lonestar2004]
    #9961175 - 03/12/09 11:05 PM (12 years, 7 months ago)

It is, but I think they're saying that the FDIC's funds are low. So if a big bank like Bank of America fails or something they will be wiped out and then couldn't pay any further funds.

Basically they're asking for authority to use $500 billion in case of an emergency, because they didn't collect their fees. Now who's fault is that?

Quote:

To possibly reduce the fee increase, the FDIC has asked Congress for the temporary authority to borrow as much as $500 billion from the US Treasury - up from the current $30 billion limit - in case the number of bank failures increases even more dramatically. If Congress approves the measure, to borrow more than $100 billion, the FDIC would still need permission from the Federal Reserve, the Treasury Department, and the White House.




--------------------
Muppet Said:

so yeah:
- 'sex' five times
- once with a man
- once with a cadaver
- and thrice with actual women(all of which were prostitutes)
Best story ever!

www.panicstream.com :thumbup:


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OfflineMrBump
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Registered: 10/01/02
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Loc: Denver, Colorado
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: lonestar2004]
    #9961181 - 03/12/09 11:05 PM (12 years, 7 months ago)

FDIC is asking for its bailout now. Its just another skeleton of questionable/irresponsible government policy out of the closet. This seemed avoidable.


--------------------
If it weren't for the bloody corpses, I wouldn't have any corpses at all.

There are two ways to get to the top of an oak tree: start climbing or sit on an acorn.

Are you a carrot, an egg, or a coffee bean?


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OfflineMrBump
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: pinkfloydms]
    #9961195 - 03/12/09 11:09 PM (12 years, 7 months ago)

Quote:

pinkfloydms said:
It is, but I think they're saying that the FDIC's funds are low. So if a big bank like Bank of America fails or something they will be wiped out and then couldn't pay any further funds.

Basically they're asking for authority to use $500 billion in case of an emergency, because they didn't collect their fees. Now who's fault is that?

Quote:

To possibly reduce the fee increase, the FDIC has asked Congress for the temporary authority to borrow as much as $500 billion from the US Treasury - up from the current $30 billion limit - in case the number of bank failures increases even more dramatically. If Congress approves the measure, to borrow more than $100 billion, the FDIC would still need permission from the Federal Reserve, the Treasury Department, and the White House.







It's beautiful in its own sick way. They don't, or can't collect in the years of good harvest. But now that the banks have no money, the FDIC now wants permission to triple their premiums.  :foreheadslap:


--------------------
If it weren't for the bloody corpses, I wouldn't have any corpses at all.

There are two ways to get to the top of an oak tree: start climbing or sit on an acorn.

Are you a carrot, an egg, or a coffee bean?


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Invisiblepinkfloydms
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Registered: 05/27/04
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: MrBump]
    #9961198 - 03/12/09 11:09 PM (12 years, 7 months ago)

I don't think they're actually asking for money right now though are they? I thought they were just asking for the authority to raise the amount they would be able to use in case of emergency from $30 billion to $500 billion.


--------------------
Muppet Said:

so yeah:
- 'sex' five times
- once with a man
- once with a cadaver
- and thrice with actual women(all of which were prostitutes)
Best story ever!

www.panicstream.com :thumbup:


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OfflineMrBump
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Registered: 10/01/02
Posts: 4,263
Loc: Denver, Colorado
Last seen: 2 years, 3 months
Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: pinkfloydms]
    #9961246 - 03/12/09 11:16 PM (12 years, 7 months ago)

I think its more along the lines of getting the authority to borrow that much money just in case. The borrowed money would be repaid once the assets of that failed bank are sold.

I don't know what that guarantee to repay the loan means to you. Sounds like a guaranteed box of shit to me (w/ all due respects to Chris Farley)


--------------------
If it weren't for the bloody corpses, I wouldn't have any corpses at all.

There are two ways to get to the top of an oak tree: start climbing or sit on an acorn.

Are you a carrot, an egg, or a coffee bean?


Extras: Filter Print Post Remind Me! Notify Moderator Top
Invisiblepinkfloydms
!!!!!
Male

Registered: 05/27/04
Posts: 4,470
Loc: City of Dreams
Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: MrBump]
    #9961326 - 03/12/09 11:31 PM (12 years, 7 months ago)

Oh for sure. If the banks failed how they fuck would the FDIC have the money to pay back the "loan"?


--------------------
Muppet Said:

so yeah:
- 'sex' five times
- once with a man
- once with a cadaver
- and thrice with actual women(all of which were prostitutes)
Best story ever!

www.panicstream.com :thumbup:


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Offlinelonestar2004
Live to party,work to affordit.
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Registered: 10/03/04
Posts: 8,978
Loc: South Texas
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: pinkfloydms]
    #9961847 - 03/13/09 12:45 AM (12 years, 7 months ago)

Quote:

pinkfloydms said:
I think they're saying that the FDIC's funds are low. So if a big bank like Bank of America fails or something they will be wiped out and then couldn't pay any further funds.







are you trying to start a bank run on Bank of America?

:grin:

BANK RUN! Pull your money out now!




--------------------
America's debt problem is a "sign of leadership failure"

We have "reckless fiscal policies"

America has a debt problem and a failure of leadership.

Americans deserve better

Barack Obama


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Offlinelonestar2004
Live to party,work to affordit.
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Registered: 10/03/04
Posts: 8,978
Loc: South Texas
Last seen: 10 years, 6 months
Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: pinkfloydms]
    #9983174 - 03/16/09 06:32 PM (12 years, 7 months ago)

thank god my bank is in good shape....:smirk:

http://www.redneckbank.com/


--------------------
America's debt problem is a "sign of leadership failure"

We have "reckless fiscal policies"

America has a debt problem and a failure of leadership.

Americans deserve better

Barack Obama


Extras: Filter Print Post Remind Me! Notify Moderator Top
OfflineScavengerType
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Registered: 01/25/08
Posts: 5,784
Loc: The North
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: lonestar2004]
    #9983355 - 03/16/09 06:54 PM (12 years, 7 months ago)

wow that is a real bank... I think.


--------------------
"Have you ever seen what happens when a grenade goes off in a school? Do you really know what you’re doing when you order shock and awe? Are you prepared to kneel beside a dying soldier and tell him why he went to Iraq, or why he went to any war?"
"The things that are done in the name of the shareholder are, to me, as terrifying as the things that are done—dare I say it—in the name of God. Montesquieu said, "There have never been so many civil wars as in the Kingdom of God." And I begin to feel that’s true. The shareholder is the excuse for everything."
- Author and former M6/M5 agent John le Carré on Democracy Now.
Conquer's Club


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Offlinelonestar2004
Live to party,work to affordit.
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Registered: 10/03/04
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: ScavengerType]
    #9983443 - 03/16/09 07:05 PM (12 years, 7 months ago)

it is!

crazy.....:grin:


--------------------
America's debt problem is a "sign of leadership failure"

We have "reckless fiscal policies"

America has a debt problem and a failure of leadership.

Americans deserve better

Barack Obama


Extras: Filter Print Post Remind Me! Notify Moderator Top
OfflineRedstorm
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Registered: 10/08/02
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Re: Congress did not authorize the FDIC to collect premiums from 1996 through 2006 [Re: lonestar2004]
    #9983449 - 03/16/09 07:06 PM (12 years, 7 months ago)

:lol:

I couldn't believe it was real but it definitely is.


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