Hacker News Reader

Comment by carmelo7 | Hacker News Reader

That is absolutely untrue. Taxpayers do not pay for any FDIC insurance.

In all fairness, those of you downvoting the parent need to address the following:

The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities.

Source: http://www.fdic.gov/about/learn/symbol/index.html

I remember there being some talk about FDIC potentially needing to borrow from the Treasury during the financial crisis however as far as I know, it didn't happen.

That's a bit like the way Fannie and Freddie received no direct appropriations... before they collapsed. They had an implicit guarantee, which was worth just as much as cash, and wound up costing a lot.

When people trust the FDIC, it's not based on the idea that they're an independent entity charging sufficient premiums to handle any eventuality. They're not; they predict they will be below their legally-required reserve level through 2017 and not hit their target reserve level until 2027 (with rosy economic assumptions):

http://problembanklist.com/fdic-deposit-insurance-fund-to-re...

http://problembanklist.com/fdic-projects-losses-of-billion-o...

The FDIC only inspires confidence because of the understanding that if necessary the full resources of the government would back it.

Not so far, but if we ever let more than one of the TBTF banks go, then the FDIC will be taking out billions in loans at sub-market interest from the taxpayer.

Reply on news.ycombinator.com