Irony of the week: Bank bailing out the government?

For those who are sick of hearing about the government bailouts and wish to hear something new, then take this: the banks might just come to the rescue of the government, if the FDIC decides it wants some money from the healthier banks to salvage its insurance fund that is being strained by bank failures, one after another.

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.

The Federal Deposit Insurance Corporation, which oversees the fund, is said to be reluctant to use its authority to borrow from the Treasury.

Under the law, the F.D.I.C. would not need permission from the Treasury to tap into a credit line of up to $100 billion. But such a step is said to be unpalatable to Sheila C. Bair, the agency chairwoman whose relations with the Treasury secretary, Timothy F. Geithner, have been strained.

Let’s look at this a little less seriously.  Many banks are reported to be not lending still. The question is, will it lend to the FDIC? Or I wonder, how onerous are the banks going to make it for the FDIC? This could be payback time for the banks. And perhaps a way to silence those who have been staunch critics of the bailouts.

Source: NYT

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