The Federal Deposit Insurance Corporation (FDIC), staring down nearly $23 billion in outstanding costs following recent bank failures, is deliberating shifting much of that financial burden onto the nation’s largest banks.
The Federal Deposit Insurance Corporation (FDIC), staring down nearly $23 billion in outstanding costs following recent bank failures, is deliberating shifting much of that financial burden onto the nation’s largest banks.
Bloomberg reported that the FDIC is expected to propose a “special assessment” in May primarily focused on recuperating some of the $128 billion deposit insurance fund that has taken a significant blow since the collapse of Signature Bank and Silicon Valley Bank. In shifting much of this financial burden from community lenders onto larger banks such as JPMorgan and Chase & Co. and Bank of America, which already pay billions of dollars into the Deposit Insurance Fund.
However, the report noted that the assessments are still in the early stages and details of the matter may change. Bloomberg also noted that looking to the big banks to absorb the brunt of the cost is viewed as the most realistic solution, according to those close to the situation.
According to the FDIC, the Deposit Insurance Fund is funded mainly through quarterly assessments of lenders on insured banks, calculated by multiplying its assessment rate by its assessment base.
The New York Post reported that despite the collapse of the two large banks, the Biden administration apparently assured Americans that their money would be insured, even those who have more than the FDIC’s threshold of $250,000 in their accounts.
The president’s administration also suggested that taxpayers would not be bearing the direct cost of the failure of the two banks.
However, there are still those skeptical of how the finances will shake out in the coming year. Republican Senator John Boozman reportedly shared the following with Janet Louise Yellen: “I’m concerned that Arkansans will have to subsidize Silicon Valley Bank and Signature Banks deposits, and maybe others that come forward. Will the community banks get charged that special assessment?”
Yellen suggested that FDIC has substantial control over which banks will be paying.
It remains to be seen how the bank crisis will affect the average American.
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