American bank deposits are insured up to $250k by the FDIC, the Federal Deposit Insurance Corporation.
This number was $100k for many years, until some of our Congress critters realized two things:
* Many banks were going to fail
* They had money in those banks
As then-Congressman Obama stated:
"The majority of American families should rest assured that the deposits they have in our banks are safe. That is why today, I am proposing that we also raise the FDIC limit to $250,000 as part of the economic rescue package -- a step that would boost small businesses, make our banking system more secure and help restore public confidence in our financial system."
What Congress wants, Congress gets -- as long as it can be bought with taxpayer dollars.
Last September, the FDIC was singing a different tune:
"Let me be clear: The insurance fund is in a strong financial position to weather a significant upsurge in bank failures. The FDIC has all the tools and resources necessary to meet our commitment to insured depositors, which we view as sacred. I do not foresee -- as Mr. Evans suggests -- that taxpayers may have to foot the bill for a bailout."
It appears that it's not so important to "forsee" things when you have access to an unlimited supply of other people's money.
The Congress recently approved a one hundred billion dollar credit line from the taxpayers to the FDIC. Let's see how quickly the bureaucrats burn through that.
Interestingly, there is more to this story than first meets the eye. One might assume that the FDIC's going broke is only a result of Congressional foolishness and the general failure of our new socialist economy -- but that would not be quite accurate.
It turns out that the FDIC has not been following federal law in implementing Prompt Corrective Action against these failing banks. Why? Why would Sheila Blair and Tim Geithner risk their careers by violating federal law by delaying placing failed banking institutions into receivership? The answer, as per usual, is politics. The Obama administration is attempting to make the economy look better at the expense of actually making the problem worse.
This can't go on forever, of course. Eventually the piper must be paid -- by the American taxpayer.Jose Martinez is the author of
The FDIC is Broke and
Kanye West is Al Gore.
