Stimulus.org - FDIC

Raise Limit on Insured Deposits: $100K to $250K

Maya MacGuineas — Mon, 17 Aug 2009 14:09:49 +0000

Date:

October 3, 2008

Who:

FDIC

Policy Area:

Financial Sector Policy

Economic Target:

Consumers

Economic Target:

Depository Institutions

Action Type:

Regulatory Change

Maximum Amount:

700000000000

Amount Spent Special Symbol:

Deficit Impact Special Symbol:

The Emergency Economic Stabilization Act of 2008 temporarily raised from $100,000 to $250,000 the amount of deposit and share insurance in FDIC and Federal Credit Union member organizations. Initially, this law stated that the increased limit on insured deposits would last until 12/31/2009. However, On 5/20/2009 President Obama signed the Helping Families Save Their Homes Act, extending the temporary deposit insurance limit of $250,000 untill 12/31/2013. After that date, the FDIC deposit insurance limit will return to $100,000 except for IRAs and other retirement accounts.

Source:

Emergency Economic Stabilization Act of 2008

FDIC Release 5/22/2009

Notes:

Limit will return to $100,000 after Dec. 31, 2013. Maximum amount indicates total value of new insured deposits.

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Public-Private Investment Fund: FDIC Guarantees

suggp — Fri, 10 Jul 2009 19:42:16 +0000

Date:

February 10, 2009

Who:

FDIC

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

600000000000

Amount Spent:

727770000

Deficit Impact Special Symbol:

See the companion TARP entry for the Public-Private Investment Program (PPIP) and the Fed entry for PPIP.

Program first announced by Treasury Secretary Geithner on 2/10/2009.

Program is run by the Treasury in conjunction with the Federal Reserve and Federal Deposit Insurance Corporation. It will enlist "$75 to $100 billion" of TARP capital to create up to $500 billion in total public-private asset purchasing power. The program may eventually expand to $1 trillion in total leveraged purchasing capacity.

The Treasury released details of the program on March 23, 2009. Its aim is to use public money to entice private purchase of distressed bank loans and illiquid securities. The program has two main components:

1) The "legacy loans" program uses public financing (via TARP) to help private entities purchase pools of bank loan assets. The FDIC is charged with guaranteeing the purchase of loans once they are sold, and the Treasury provides half of the initital financing required to purchase the loan. Under the terms of the program, banks determine the loans they consider distressed and put these loans up for auction to other private market participants. The FDIC determines the eligibility of the proposed loans, and specifies how much leverage it will allow for the initial purchase. The maximum potential leverage is a 6:1 ratio, meaning that any party that purchases a loan can make the purchase at a debt to equity ratio of no greater than 6:1. For example, if a pool of loan assets costs $42, an initial payout ("equity") of $6 would be required, creating $6 in equity and $36 in debt. The bidder that wins the auction for the loan is allowed to draw on the public-private investment fund for half of its equity cost. In the case of the previous example, the bidder could take $3 from the public-private partnership, and would be required to provide the other $3 itself. The buyer issues debt that is guaranteed by the FDIC to fund the remaining cost of purchasing the loan. The FDIC is then charged with managing and overseeing the servicing of this remaining debt.

2) The "legacy securities" program has two components:

a) The government will choose five "asset managers" (selected from an open application process) that agree to raise some amount of private capital to buy legacy securities. The government matches whatever funds these asset managers manage to raise (via TARP). The private funds are matched at least one to one, although the Treasury has indicated that it may provide as much as two or even three dollars for every dollar of private capital raised. The fund manager has substantial discretion in how he/she invests the funds.

b) The Fed's recently-started Term Asset Backed Securities Lending Facility (TALF) will be expanded to include asset classes of non-agency residential mortgage-backed securities, commercial mortgage-backed securities, and other classes of asset-backed securities. Asset managers who take part in the public-private investment fund (see above) will be allowed to participate jointly in TALF.

On July 8, 2009 the Treasury, FDIC, and Fed released details concerning the Legacy Securities program of PPIP. According to the release , the "Treasury will invest up to $30 billion of equity and debt in PPIFs [Public-Private Investment Funds] established with private sector fund managers and private investors for the purpose of purchasing legacy securities. Thus, Legacy Securities PPIP allows the Treasury to partner with leading investment management firms in a way that increases the flow of private capital into these markets while maintaining equity “upside” for US taxpayers."

On September 16, 2009 the FDIC announced a pilot sale of receivership assets to test the Legacy Loans Program. A total of 12 consortiums bid in a competitive process for a portfolio of $1.3 billion in residential mortgage loans owned by the FDIC as Receiver of Franklin Bank, LLC in Houston, Texas. Residential Credit Solutions (RCS), the winning bidder, will pay $64.2 million for a 50 percent equity stake in the LLC, and the LLC will issue a $727.8 million note to the FDIC.

Source:

Treasury Term Sheet 3/23/2009

Treasury Release 7/8/2009

Notes:

Maximum risk is value of all debt that could possibly be guaranteed by FDIC under the current restrictions of a 6:1 debt-equity ratio. Amount spent as of 9/16/2009 (http://www.fdic.gov/news/news/press/2009/pr09172.html). Deficit impact unknown.

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FDIC Guarantee of Citigroup Assets

suggp — Fri, 10 Jul 2009 19:23:19 +0000

Date:

November 23, 2008

Who:

FDIC

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

10000000000

Amount Spent:

Deficit Impact Special Symbol:

Part of a government guarantee of $301 billion in Citigroup assets by multiple entities (Treasury, FDIC, Federal Reserve). After Citigroup absorbs the first $29 billion in losses, the remaining losses are split 90:10 between the government and Citigroup, with the first $5 billion absorbed by the Treasury with TARP funds, the next $10 billion paid by the FDIC, and remaining losses covered by the Federal Reserve with a non-recourse loan.

See the companion guarantee of Citigroup assets by the Fed and Treasury.

Source:

Treasury Nov. 23 Release

Term Sheet for Citigroup Asset Guarantee

Notes:

Amount spent updated as of 12/31/08.

On 1/16/2008, the Treasury revised its figure for total Citigroup guaranteed assets from $306 billion down to $301 billion.

Deficit impact unknown.

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FDIC Bank Liquidity Guarantee Program

suggp — Fri, 10 Jul 2009 19:17:47 +0000

FDIC Liquidity Guarantee Program

Date:

October 14, 2008

Who:

FDIC

Policy Area:

Financial Sector Policy

Economic Target:

Financial Institutions

Action Type:

Government Guarantee

Maximum Amount:

609187000000

Amount Spent:

313071000000

Deficit Impact Special Symbol:

Establishement of Temporary Liquidity Guarantee Program (TLGP), under which the FDIC guarantees unsecured new loans issued by banks, thrifts, and selected holding companies. Debt must be issued by June 30, 2009 and mature by June 30, 2012. Program also fully insures certain of non-interest-bearing deposit transaction accounts, much of which exceeds the existing $250,000 deposit insurance limit. Accounts guaranteed through December 31, 2009.

On 3/19/2009, the FDIC announced that it would extend its liquidity guarantee program through October 31, 2009, with "a surcharge on debt issued with a maturity of one-year or more beginning in the second quarter to gradually phase-out the program."

Source:

FDIC Oct. 14 Press Release

FDIC Oct 19 Press Release on Extension of Liquidity Program

Monthly Report Ending 4/30/2009

Notes:

Maximum amount indicates market size of total debt potentially subject to guarantee, as reported on the FDIC's monthly report for the program. Amount spent indicates total guarantees for unsecured new debt. Both figures are as of 1/4/2010. Deficit impact unknown.

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FDIC Bank Takeovers

suggp — Thu, 09 Jul 2009 19:26:40 +0000

FDIC Bank Takeovers

Who:

FDIC

Maximum Amount:

494116000000

Amount Spent:

90059000000

Deficit Impact:

90059000000

In 1933, the federal government created the Federal Deposit Insurance Corporation (FDIC) in order to promote consumer confidence in banking and insure the funds the public was placing in financial institutions. The FDIC has two main responsibilities; the first is insuring all of the deposits in member banks for individual depositors, up to $250,000, and the second is to receive all of the "failed banks" in the United States. A bank fails when it can no longer meet its responsibilities to depositors, and is closed by a state or federal bank regulatory agency. Upon receiving the bank, the FDIC becomes the bank caretaker, charged with the selling bank assets, settling debts, and negotiating claims from depositors who had more money than the maximum insurance amount in the bank. Since the financial crisis began, the FDIC has seen a dramatic increase in failed banks. This table lists all current bank failures for 2008-2010.

On May 20, 2009, as part of the Helping Families Save Their Homes Act, Congress approved a permanent increase of the FDIC's line of credit with the Treasury from $30 billion to $100 billion. In addition, the bill allows the FDIC to draw up to $500 billion until December 2010 if FDIC Chairman, Fed Chairman, and Secretary of the Treasury all agree on the need to do so.

On November 12, 2009, the FDIC adopted a rule to require banks to pay at the end of 2009 the amount they would owe the FDIC for insurance premiums over the next three years. The rule was created to shore-up the deposit insurance fund in the face of many projected bank closings for 2010.

Source:

FDIC Release 11/12/2009

Notes:

As of 12/14/2012 regulators have closed a total of 140 banks in 2009, 157 banks in 2010, and 462 banks since January 2008.

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