Federal Deposit Insurance Corporation to Lose $19B in Bank Failures by 2015

The Federal Deposit Insurance Corporation, or FDIC, is set to lose about $19 billion covering bank losses from 2011 until 2015- which is, quite sadly, somewhat good news as the deposit insurance company was banking losses nearing the $23 billion in 2010 bank collapses.

In what seems to be the theme of this ‘recovery,’ not getting totally slammed is the new coming out on top. While bank failures and massive loss of equity, value or straight out cash seems to be the order of the day, at least it isn’t 2010, when 157 banks toppled. (76 have gone under to date in 2011.) It’s also not 2009, when 140 banks failed. By this date last year, 129 banks had gone under.

The FDIC fund went “into the red” in September 2009, following the massive financial apocalypse in 2008 and the entry of the phrase “too big to fail” into American parlance. The trend continued, with the fund only starting to break even at the end of the second quarter in 2011. The numbers may seem ominous and tenuous, but FDIC officials indicate that the overall outlook is good in the long term:

“While these loss projections are subject to considerable uncertainty, under these projections and current assessment rates, the fund should reach 1.15% of estimated insured deposits in 2018,” the FDIC says.

Bankers have painted a characteristically rosy picture of the FDIC outlook and say expected losses were exaggerated. In a statement, the American Bankers Association chief economist James Chessen downplays concerns:

“The FDIC’s update on the recapitalization of the deposit insurance fund reaffirms the fact that the banking industry is rapidly returning to health and the losses once expected were overstated,. The FDIC had set aside $17.7 billion for possible bank failures losses at the start of 2011, twice what the actual losses are likely to be this year.”

Chessen seems to indicate bankers would like regulations to ease up so they can chill with the whole paying of the premiums thing. The ABA maintains the premiums are excessive:

“The banking industry, not taxpayers, is solely responsible for the financial health of the FDIC. Banks are paying $13.5 billion in yearly premiums to the FDIC, which is far in excess of the yearly costs expected by the FDIC over the next several years. The insurance fund is rebuilding faster than the FDIC had projected at the end of 2009 when the industry paid $46 billion in pre-paid assessments to ensure the FDIC would have adequate cash to handle any contingency.”

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