Friday, March 4, 2016

The FDIC’s Deposit Insurance Fund Available Assets Cover LESS THAN 0.5% Of US Bank Deposits

Negative Interest Rates in the US? Just Ask the FDIC
The FDIC maintains the Deposit Insurance Fund (DIF), which is the emergency stash for nearly all bank deposits in the Land of the Free. DIF financial statements show an incredible 54% drop in cash equivalents since last year. This means the DIF’s immediate liquidity is now just 1.2% of its total assets. In other words, nearly 99% of the insurance fund is tied up in various investments that may lose substantial value in the very financial crises that they’re meant to insure.
The FDIC has stuffed much of the DIF funds in an expanding bond portfolio. Yet by its own admission, this portfolio is down $10 billion, or roughly 14%. Plus, a good chunk of that bond portfolio has been invested in securities that earn negative interest. It’s incredible; the organization insuring the US banking system has actually purchased bonds that yield negative interest!
Now, including the losses, the fair market value of the DIF is about $62 billion. That might sound like a lot of money. But total bank deposits in the US exceeds $13 trillion, according to the Federal Reserve.
This means that the DIF has net assets available to cover less than 0.5% of all bank deposits.

For starters, the fund doesn’t come close to meeting the minimum legal reserve requirement that was established by law following the Global Financial Crisis several years ago.
Even more, the FDIC states in its own report that they need TWICE the current reserve balance as “the minimum level needed to withstand future crises of the magnitude of past crises.”
Federal Deposit Insurance Corporation (FDIC): THE DEPOSIT INSURANCE FUND
The primary purposes of the Deposit Insurance Fund (DIF) are: (1) to insure the deposits and protect the depositors of insured banks and (2) to resolve failed banks. The DIF is funded mainly through quarterly assessments on insured banks, but also receives interest income on its securities. The DIF is reduced by loss provisions associated wih failed banks and by FDIC operating expenses.

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