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Federal Deposit Insurance Corporation: Difference between revisions
Federal Deposit Insurance Corporation (view source)
Revision as of 02:19, 11 February 2025
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Between 1989 and 2006, there were two separate FDIC reserve funds: the '''Bank Insurance Fund''' (BIF), and the '''Savings Association Insurance Fund''' (SAIF). This division reflected the FDIC's assumption of responsibility for insuring [[savings and loan association]]s after another federal insurer, the [[FSLIC]], was unable to recover from the savings and loan crisis. The existence of two separate funds for the same purpose led banks to shift business from one to the other, depending on the benefits each could provide. In the 1990s, SAIF premiums were, at one point, five times higher than BIF premiums; several banks attempted to qualify for the BIF, with some merging with institutions qualified for the BIF to avoid the higher premiums of the SAIF. This drove up the BIF premiums as well, resulting in a situation where both funds were charging higher premiums than necessary.<ref>Sicilia, David B. & Cruikshank, Jeffrey L. (2000). ''The Greenspan Effect'', pp. 96–97. New York: McGraw-Hill. {{ISBN|0-07-134919-7}}.</ref> | Between 1989 and 2006, there were two separate FDIC reserve funds: the '''Bank Insurance Fund''' (BIF), and the '''Savings Association Insurance Fund''' (SAIF). This division reflected the FDIC's assumption of responsibility for insuring [[savings and loan association]]s after another federal insurer, the [[FSLIC]], was unable to recover from the savings and loan crisis. The existence of two separate funds for the same purpose led banks to shift business from one to the other, depending on the benefits each could provide. In the 1990s, SAIF premiums were, at one point, five times higher than BIF premiums; several banks attempted to qualify for the BIF, with some merging with institutions qualified for the BIF to avoid the higher premiums of the SAIF. This drove up the BIF premiums as well, resulting in a situation where both funds were charging higher premiums than necessary.<ref>Sicilia, David B. & Cruikshank, Jeffrey L. (2000). ''The Greenspan Effect'', pp. 96–97. New York: McGraw-Hill. {{ISBN|0-07-134919-7}}.</ref> | ||
Then-[[Chair of the Federal Reserve]] [[Alan Greenspan]] was a critic of the system, saying, "We are, in effect, attempting to use government to enforce two different prices for the same item{{spaced ndash}}namely, government-mandated deposit insurance. Such price differences only create efforts by market participants to [[arbitrage]] the difference." Greenspan proposed "to end this game and merge SAIF and BIF".<ref>Sicilia & Cruikshank, pp. 97–98.</ref> In February 2006, President | Then-[[Chair of the Federal Reserve]] [[Alan Greenspan]] was a critic of the system, saying, "We are, in effect, attempting to use government to enforce two different prices for the same item{{spaced ndash}}namely, government-mandated deposit insurance. Such price differences only create efforts by market participants to [[arbitrage]] the difference." Greenspan proposed "to end this game and merge SAIF and BIF".<ref>Sicilia & Cruikshank, pp. 97–98.</ref> In February 2006, President George W. Bush signed into law the [[Federal Deposit Insurance Reform Act of 2005]] (FDIRA). Among other purposes, the act merged the BIF and SAIF into a single fund. | ||
As of December 31, 2022, the balance of FDIC's Deposit Insurance Fund is $128.2 billion.<ref name="AtAGlance2022">{{cite web |date=December 31, 2022 |title=Statistics at a Glance |publisher=Federal Deposit Insurance Corporation |url=https://www.fdic.gov/analysis/quarterly-banking-profile/statistics-at-a-glance/2022dec/fdic.pdf}}</ref> The year-end balance has increased every year since 2009.<ref name="AtAGlance2022" /> | As of December 31, 2022, the balance of FDIC's Deposit Insurance Fund is $128.2 billion.<ref name="AtAGlance2022">{{cite web |date=December 31, 2022 |title=Statistics at a Glance |publisher=Federal Deposit Insurance Corporation |url=https://www.fdic.gov/analysis/quarterly-banking-profile/statistics-at-a-glance/2022dec/fdic.pdf}}</ref> The year-end balance has increased every year since 2009.<ref name="AtAGlance2022" /> | ||