FDIC Deposit Fund Turns Negative

Yesterday, the FDIC reported that the deposit insurance fund fell below zero for the first time since the third quarter of 1992 (during the savings-and-loan crisis). The fund balance, as of the end of the third quarter, stands at -$8.2 billion, including the more than $38 billion set aside for projected losses from bank failures over the coming year.

The economic downturn's onslaught of bank closings combined with the FDIC’s increase of despot insurance from $100,000 to $250,000 on all individual bank deposits have depleted the FDIC's reserves.

To bolster the deposit fund, the FDIC has already approved a measure (as we discussed here) to require insured financial institutions to prepay three year worth of deposit premiums. This will provide the FDIC with around $45 billion at the end of this year.

The FDIC release also reported that quarterly earning of insured banks were over $2.6 billion, above the $4.3 billion in losses during the second quarter. However, 26 percent of all insured banks reported net losses for the third quarter.

Since the beginning of 2008, the FDIC has closed 150 banks--124 of which were in 2009. Visit Stimulus.org for a full list of FDIC bank closings since 2008 and their total costs to the deposit insurance fund.