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Some interesting things have occurred to me since my first post.


First, even before FDIC existed, banks that crashed, were always bought out by other banks.   After all, every bank is interested in getting new customers, and of course, more deposits.    During the great crash that ushered in the Depression in the 1930s, the worst hit customers still got back 85% of their deposits.


Second, the FDIC plans to double it's fees.  This could be a very very bad move.   By doubling the fees, this will undoubtedly reduce interest rates to savings and money market account.  That undoubtedly will prompt people to pull their money and move them to investments with better returns, especially since inflation is on the raise.   This could make the whole problem worse.


Third, this isn't the first time the FDIC has failed to meet needs without tax payer subsidies.  In the 1980s, during the S&L 'crisis', the FDIC blew through $150 Billion in tax payer money.   So another $150 Billion is not going to be a shocker to me.


Forth, it looks like FDIC is also violating the S.E.C. requirements that Fannie Mae and Freddie Mac were before.  Namely that they must have capital funds to cover at least 5% of their liabilities.   Of course I'm sure the FDIC doesn't have to follow the same rules as the rest of the country.


And finely, I realized that the FDIC is controlled by the government, which is part of the reason it's doing so badly.   The government back in 2008, passed a law that arbitrarily forced FDIC to cover $250K in deposits, instead of $100K.    Of course, the FDIC hasn't been collecting fees in proportion to the new $250K coverage for the past 10-15 years.  So it's very logical they wouldn't have the capital to cover their liabilities, thanks to government.


A privately run institution, would never arbitrarily raise coverage without the capital, or the fee rates, to cover the new coverage.  Especially during a time of mass bank failures.   But of course in a situation where all economic screw ups, can be covered by an out of control government, this isn't a problem.


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