Has the FDIC run out of money? The graphic speaks volumes

Economics blogger Michael Shedlock, aka “Mish,” is asking whether the FDIC has any money left in its fund after the $2.8 billion rescue of Colonial BancGroup in Alabama. It was the biggest failure since Washington Mutual last year and the sixth biggest ever. Competitor BB&T is now feasting on the Colonial carcass.

The FDIC says it has $13 billion in its fund and has set aside another $25 billion to cover individual depositors up to $250,000 per account. But Mish, a registered investment  advisor at Sitka Pacific Management, isn’t buying it:

Tonight, inquiring minds are asking “Is There Any Money Left In The Fund?”

For clues, please consider Saxo Bank Research FDIC’s Shrinking Deposit Insurance Fund – A Testimony of Current Accounting Standards.

As late as in the end of April just before the release of the bank stress tests, Ms. Bair Chairman of the FDIC said they would not need any additional bailouts from the U.S Treasury within the immediate future according to The Bulletin. After three new bank failures last Friday, the FDIC’s Deposit Insurance Fund (DIF) diminished by another $185 million for a total remaining balance of $648.1 million.

Below is a graph showing the DIF capital as a percentage of total bank deposits insured by the FDIC. Note that this graph is based on the old insurance limit with a maximum coverage of $100.000/account. This limit has been changed to cover up to $250.000/account until January 1st 2014. Estimates say that the change increases the deposits covered under FDIC insurance to approximately $6 trillion in total.

fdic fund ratios

via Mish’s Global Economic Trend Analysis: As of Friday August 14, 2009, FDIC is Bankrupt. (h/t Enlightened Wallstreeter)

That graph looks pretty worrisome. Mish adds that recent changes to accounting rules are hiding just how damaged bank assets are — and that the number of failures is only likely to increase in the year ahead.


5 thoughts on “Has the FDIC run out of money? The graphic speaks volumes

  1. That graph is really scary, and is exactly the kind of thing that scares me about the government–you can never really get to the bottom of whatever information is being circulated. Upping the coverage to 250K seems good, but then the FDIC may not be able to pay it! It’s like everything is about consumer confidence and not the underlying, structural considerations.

    I wonder how much money (if any) the FDIC really has left?

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  3. I just don’t understand our strategy in fixing our economy. We haven’t corrected the basic flaws in the bank/investment house mergers, all the bad players are still in place without showing a shred of responsibility, main street is still shedding jobs, nothing has been done to increase homegrown industry, banks are still failing, the toxic assets we were supposed to be buying are still there, the housing crooks are back in business selling refinancing loans, housing is not recovering, state governments are failing and using stimulus money to prop themselves up, we are still bleeding money in foreign wars and the same clueless cheerleaders are claiming the recession is behind us as if to will it so. No one is facing the reality of inaction and are happily rebuilding the house of cards without considering what another crash would mean. And the most harrowing problem is that we are at the mercy of a communist government that is quickly losing confidence in our ability to put our house in order. I have been worrying that we have gone a bridge too far and there is no way out.

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