Four More Banks Fail: Stress Testing FDIC

Since four more banks have just failed, the question is bound to come up when the FDIC will run low on money and have to go begging to the Treasury.

American Southern Bank, Michigan Heritage Bank, First Bank of Beverly Hills, and First Bank of Idaho all went under. These join the FDIC’s Failed Bank List

According to MarketWatch, the action will cost “the Federal Deposit Insurance Corp.’s deposit insurance fund nearly $700 million.”

At the end of 2008, the FDIC had a balance of only $19 billion, and according to The Wall Street Journal, some senators would like to arrange for the “Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.”

The government needs to stress test the FDIC and give the public a projection of how much more of their tax dollars are going to make their way into the banking system through money coming from the Treasury to cover deposits of failed banks. That will add to the Treasury’s need to borrow, potentially driving up interest rates, and certainly, driving up taxes during the next two or three years.

Douglas A. McIntyre