FDIC's DIF Is Minus $8.2 Billion to Cover $5.3 Trillion

DIF-insured deposits. How?

The government institution that I love to hate, FDIC, has released its Quarterly Banking Profile report for the 3rd quarter that ended on September 30.

They already admitted that the DIF (Deposit Insurance Fund) went negative at the end of September, which was highly unusual as FDIC is not known for timely disclosure of their own problems. Sure enough, DIF is in the hole for $8.243 billion as of September 30. Since then, FDIC has closed 29 banks.

What has caught my attention though, is the sudden jump in DIF-insured deposits in the 3rd quarter. It went from $4.817 trillion in the 2nd quarter to $5.308 trillion in the 3rd quarter, a 10.2% jump. This additional $491 billion, I believe, is roughly the same amount that has been yanked out of money market funds this year. The Treasury Department stopped the guarantee on money market funds in mid September.

FDIC Chairman Bair already mandated that the banks, from "too big to fail" to "too small to bother", prepay 3-year worth of DIF premiums to fill the hole, unduly punishing the more prudent, small banks. All the extra burden on the banks will be passed on to the depositors in increased fees and other inconveniences (such as having their accounts shut down).

Why is Sheila Bair still keeping her job remains a mystery to me. But then, it's a mystery to me that Geithner is still heading the Treasury Department...

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