Magazine : Archives : 4th Quarter 2009
The Outlook for the FDIC’s Deposit Insurance Fund
On Sept. 29, the FDIC proposed that banks pump cash into the Deposit Insurance Fund, or DIF, by prepaying $45 billion of deposit insurance premiums. While this prepayment will address the FDIC’s short-term cash-flow needs, it has heightened confusion about the DIF’s financial outlook.It is important to understand that the FDIC is not an insurance company. Instead, the FDIC merely operates a government guarantee program funded entirely by banks. The DIF balance is merely an accounting as to whether the banking industry is ahead or behind in paying for the FDIC’s operating expenses and the losses it incurs in protecting...
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