The FDIC’s “Insurance Fund” Myth
By: Vernon Hill Thursday, September 11, 2008 10:02 AM
The insurance premiums aren’t really premiums at all, therefore. They’re a tax by another name.
Actually, it’s worse than that. The FDIC, persisting in the myth that its fund really is an insurance pool, now proposes to raise the “premiums” it charges banks to make up for the “fund’s” coming shortfall. The financially weakest banks will be hit with the biggest tax hikes.
Which makes absolutely no sense. You don’t need me to tell you the banking industry is on the ropes. The last thing it needs (or the economy needs, for that matter) is an expense hike that will inhibit banks’ ability to rebuild capital, extend new loans, or both. If the FDIC wants to raise its bank tax once the industry has recovered, I suppose that’s fine. But to raise taxes on the industry now is perhaps the dumbest thing the agency can possibly do. At the margin, the FDIC will be helping bring about more of the failures it says it wants to prevent.
But this is the government we’re talking about, so logic goes out the window. First, the FDIC insists its mythical bank insurance fund exists, when it really doesn’t. Then the agency does what it can to run the imaginary fund’s finances straight into the ground. Your tax dollars (sorry, “premiums”) at work. . . .
Filed under: Bailout, Bailout Negotiations, Bailout Opposition, Banking Crisis, Financial Crisis, Tax Increase, Tax Payer Rip Offs | Tagged: Bailout, Bailout Increase, Bailout Negotiations, FDIC Limit Increase, Tax Increase |