FDIC Chairwoman Sheila Blair announced last week that the quasi-public insurance monopoly would become insolvent in the next few months if it is not allowed to implement a one-time, draconian surcharge on all U.S. banks. This charge will, in some cases, wipe out last year’s profits. At the same time, the FDIC has requested an additional $500 billion "loan" to from Congress.Small, solvent, well-run local and regional banks have objected. They rightly claim that they are not the problem. These banks have a solid and growing deposit base and many of them service their own loans and so did not get caught in the trap of originating bad loans and dumping them on the secondary mortgage market in federally-guaranteed bundles. Whether they know it or not, these banks intuit that, like Social Security, there is no FDIC "fund." FDIC insurance, like social security, is just another government-coerced Ponzi scheme – a tax that, according to former FDIC commissioner Bill Isaac, goes immediately to the Treasury to buy "spending . . . on missiles, school lunches, water projects, and the like." Rather than increasing their taxes and punishing their relatively good behavior, these small banks suggest that the FDIC look first to Bailout Banks, the Wall Street mega-banks that have received nearly a trillion dollars in unearned, government-supplied capital via the printing press, for any increased insurance premium/tax.
Ms. Bair rejected these pleas by claiming that FDIC law does not allow her to "discriminate" against banks based on their size.
Clever.
What is really going is that the Bailout Banks are using the government and its insurance monopoly to help them gain market share by drastically increasing the operating costs of their smaller, better-run and scrappy competitors.
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