The FDIC is a crock of crap: The total liability for the FDIC in 2007 was $4.29 trillion...

[originalpckelly]

The actual amount of money the FDIC kept in case a bank failed for that year:
$.052 trillion or $52 billion. That's about 1.25% of the total liability.

So, if the shit really, really, truly hits the fucking fan, the FDIC is going to be sucking blood from the federal government in the hundreds of billions and possibly trillions.

And here's the real gist of this:
It's yet another example of how profits have been privatized and losses socialized, instead of paying higher premiums into the FDIC's insurance fund, they pay a pittance and have this massive house of cards that will come crashing down on us all, so the government must backstop the FDIC in order to prevent an even larger problem from happening.

So, in other words, THE FDIC IS A CROCK OF CRAP!

The cake is a lie people, the cake is a lie.

[depakid]

1. You're confusing liability with exposure

Just because a person or entity is exposed to liability doesn't mean that's it's likely (or even remotely likely) that they'll end up on the hook.

You probably take similar risks (i.e. are exposed) every time you drive your car).

[originalpckelly]

2. 40% of banks failed in the USA during the first years of the Great Depression...

we've seen a lot of failures, but none on that scale yet. If that happens, or even comes close to happening, the fund will run out and it will have to be bailed out by the federal government.

And it's irresponsible to only have enough insurance to cover 1.25% of potential liabilities, these people should be ashamed they keep so little on hand. And this is on top of the bail outs preventing more failures in the first place.

[hfojvt]

3. one thing that can make EVERY bank in America fail

is if 60% of their depositors lose confidence in the bank and run to take out all their money. Faith in the FDIC keeps people from doing so on a large scale.

But the liability for the FDIC was why we needed to bail out the banking system (and still do).

[originalpckelly]

7. If only 1.25% of the insured deposits need to be replaced...

the fund runs out. And it's actually lower than the 2007 level, because of the number of bank failures.

[readmoreoften]

9. Sounds to me like "every bank failing" isn't the issue.

Sounds like the amount of banks hitting up the FDIC over 1.5% simultaneously will trigger an issue. Or maybe I'm not catching something. :shrug:

[indepat]

10. Doesn't FDIC premiums actually flow into the US treasury, much as payroll taxes (social

and Medicare), and being used for other governmental purposes and, when the FDIC incurs a deposit insurance loss, such as the $4 billion? on Continental Illinois back in the dark ages, flows out of the treasury as an outlay. Remember how Stockman and the Gipper got their panties all in a wad when learning that this FDIC payout had increased the Federal deficit that year by $4 billion. :P

[notesdev]

4. If the SHTF

the FDIC won't even be a roadbump to the bank runs.

If I had to give some advice... let me just say that it wouldn't hurt to have a few thousand dollars in actual physical cash just in case.

[Uben]

5. You don't get anything from savings accounts anyway

I'm gonna keep some cash on hand just in case!

[originalpckelly]

8. I think the deterrent of the FDIC is probably muted by bank cards...

because many Americans don't actually use cash, but directly draw on their accounts for each transaction. Whereas before, a week or two without being able to get to your bank may not have hurt for everyday expenses, today it means you practically have no money.

So people will be worried about their cash and start drawing down their accounts, like you plan to, even if they don't fully close them.

[originalpckelly]

6. And the thing is, that if they add a couple trillion on to the deficit...

and therefore the debt, that makes the debt over 100% of GDP, because it's so close already. Might that cause the credit rating of our country to be downgraded?

And then of course, there's the problem of the uninsured deposits. If they don't replace those, then the money supply will contract, because of the way we increase it in this country by loaning out money that's on call. So what then?