Economics
The FDIC's Gift to Banks
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The Federal Deposit Insurance Corp. isn't the only beneficiary of a plan to refill its coffers. The proposal, which the banking regulator announced on Sept. 29, also offers an intriguing way for financial firms to boost their capital and raise their profits.
Under the proposal, banks would prepay three years' worth of insurance fees, or roughly $45 billion. The money will help the agency dodge a cash crunch as it deals with a record number of failing institutions. So far 50 banks have been taken over by the agency in the third quarter, vs. a year ago. If the plan goes through, the banks would pay the cash up front but take the hit to earnings over several years. Banks that don't have the means to pay could seek an exemption.