This morning, news hit that Florida's BankUnited has failed and will cost the Federal Deposit Insurance Corp ("FDIC") $4.9 billion -- the most of any failure so far this year. It likely won't be the last. But don't worry: the FDIC won't run out of money, even though it probably should. It, and consequently the banks it insures, has been bailout out.
Bair & co. have known for some time that their insurance reserve fund is in trouble. For that reason she scheduled a meeting for this afternoon to finalize a special assessment that she intends to impose on banks to increase the size of that fund. The meeting had been scheduled for a while; its occurrence on the same day as the largest failure of the year is only coincidence.
Originally, a 20 basis point per insured dollar assessment fee was proposed. For some banks, that amounts to a lot of money. Bank of America, one of the most troubled out there, has something like $880 billion in deposits. Not all those deposits are insured, but even if only $500 billion are, then that assessment amounts to $1 billion -- not chump change for an institution already struggling to stay afloat.
But fear not, this is the United States. So like every other financial problem, it can be solved with borrowing. The FDIC's borrowing authority was $30 billion -- until Wednesday of this week. That's when President Obama signed the "Helping Families Save Their Homes Act," which included a provision permanently raising that borrowing authority to $100 billion, and temporarily to $500 billion. That money comes from the Treasury, who also doesn't have that kind of cash lying around, but can also just borrow it from others. Like China.