This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

FDIC Cuts Bank Insurance Fees

In a bow to struggling banks, the FDIC has agreed to slash its insurance reserves on banks, and that could open up the pipelines for more credit and lending.

Here's the back story. The Federal Deposit Insurance Corporation, or FDIC, is responsible for insuring the bank deposits of tens of millions of Americans. A big chunk of their reserve fund comes through fees charged to banks to participate in the FDIC insurance program.

Banks generally have no problem with the FDIC's insurance deal; having federally backed insurance is a big selling point to a bank trying to woo customers.

The problem, though, stems from the lousy economy and the collapse of a burgeoning number of U.S. banks.

Overall, the FDIC insures the deposits of about 8,400 banks through February 2009. The FDIC has already closed 36 U.S. banks in 2009, compared to 25 in 2008 (during the last big banking crisis the FDIC closed more than 500 U.S. banks in 1989).

When the FDIC closes a bank, it either tries to pursue a new buyer for the failed bank (as it did for Washington Mutual when JPMorgan Chase (JPM - Get Report) stepped in to take over) or it closes the bank and pays off the deposits for up to $250,000 in assets.

Consequently, in a troubled financial environment where the FDIC is paying out billions in deposit insurance to customers, it's going to need more money. The agency estimates it will spend about $70 billion by 2013 in insurance payouts to customers at failed banks. As a result, the FDIC's insurance fund is at an all-time low at $18.9 billion at the end of 2008, as opposed to $52.4 billion at the end of 2007.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
JPM $60.17 -0.02%
AAPL $124.09 -0.27%
FB $81.42 -0.97%
GOOG $543.10 -0.89%
TSLA $188.32 -0.24%


DOW 17,692.74 -83.38 -0.47%
S&P 500 2,058.27 -9.62 -0.47%
NASDAQ 4,863.1790 -37.7060 -0.77%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs