FDIC May Borrow From Treasury

With all the recent bank failures, the FDIC is finding itself in a cash crunch. They have the assets to stay afloat, but liquidity may be a challenge if this keeps up (which it is expected to).

Chairman Sheila Bair announced that cash flow issues may lead them to call on the Treasury for temporary funds. The goal is to keep enough cash on hand to credit bank customers, and then repay any Treasury loans after the failed bank is sold.

The FDIC prepared for an increase in bank failures by adding staff, but it looks like they didn't get all the financial ducks in a row. For more details, see Slate's The Big Money feature.

Further reading:

• How FDIC Insurance Works
• What Happens in a Bank Failure?