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Most banks are safe....so is the FDIC?

See the full article from http://www.money.cnn.com:

July 21, 2008: 4:00 AM EDT

"The IndyMac failure will take a chunk out of the fund the FDIC has to insure deposits. But bank experts aren't worried about it running out of money."

"NEW YORK (CNNMoney.com) -- The FDIC has gone out of its way to stress that most banks are safe. But how safe is the FDIC?"

"Shelia Bair, the chairman of the Federal Deposit Insurance Corp., said last week that she believes the takeover of the bank IndyMac, which the FDIC seized on July 11, will cost between $4 billion and $8 billion."

"The FDIC currently has a record $53 billion at its disposal in a fund to payoff customers of failed banks like IndyMac."

The article continues to discuss the issue of the amount in the FDIC fund versus the dollar amounts usually...

...needed to cover the insured losses upon a bank failure (amounts of which are apparently much smaller than consumers would expect).

Bair said the banks will be paying higher premiums into this fund now because of the IndyMac failure and addressed bank customer worries about the soundness of the FDIC. She believes that even with more bank failures on the horizon, the FDIC will be able to handle the costs.

Other financial experts, like Jaret Seiberg, financial services analyst for research firm Stanford Group, seem to agree with Bair. In their opinion, most of the future bank failures will most likely be small institutions costing the FDIC little to resolve.

The difficulty of course, is really knowing which bank could fall apart next. Many offering predictions and projections are often all wrong.

And that the FDIC has a watch list they release along with combined assets, they still keep the actual names of those banks that are on the list secret to prevent runs on deposits.

While the FDIC is attempting to allay public fears, the article is more than dire as it discusses other industry analysts who think more of the majors are in bigger danger zones than the FDIC wants to admit publicly.

However, it is important to remember that IndyMac's specialty was mortgage loans for borrowers with unverifiable stated income and assets. Other banks are more diversified in their holdings.

So...the banks pay an increased FDIC premium, they'll pass that along to their customers of course...and worst case scenario...well, there are taxpayer funds!


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