Sometimes budgeting tricks undertaken by the Federal Government boggle the mind. Take, for example, the Treasury debt ‘held’ by the Social Security Trust Fund. The trust fund operates much like a pyramid scheme… except investors are new generations of workers and they have no way to opt out.
- Trojan Piggy Bank (Andwat)
This article is not about Social Security. It’s about the Federal Deposit Insurance Company, better known as the FDIC.
The FDIC currently collects insurance ‘premiums’ from banks under its coverage and adds the revenue collected to the general Treasury fund. Fundamentally, the FDIC insurance is run just like a tax. The so called insurance is actually just an entry in a ledger, there is no separate account to house the funds collected by the FDIC. These funds can be spent at random, just like other Treasury funds, and are backed by the full faith and credit of the United States. As Felix Salmon recently pointed out, the FDIC cannot run out of money. As he also reports, the FDIC is backed by a $500 billion line of credit. The $13 billion in funds figure bandied about is only an accounting trick stating that the FDIC took in $13 billion more than it paid out, so far in its existence.
So, there is no need to worry about the safety of your FDIC insured deposits. However, that says nothing about any inflation which may creep back into the economic picture in the near future. The FDIC is only an accounting gimmick and there is no need to worry about its financial health. For your indulgence, here is the list of FDIC bailed out institutions.
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