The failure of Congress to raise the debt ceiling should have no short-term impact on the ability of the FDIC to cover insured deposits.
The FDIC Deposit Insurance Fund (the “Fund”) is supported by assessments levied by the FDIC on individual banks. After experiencing above normal outflows from the Fund due to the recent spate of bank failures, the FDIC recently required banks to prepay three years’ worth of premiums in order to restore its financial strength. While the Fund has been running a negative balance on an actuarial basis for several quarters, the FDIC projected that the Fund would have a positive balance by the end of the second quarter.
At the end of the first quarter (the last date for which information is currently available), the Fund’s liquid assets, cash and marketable securities, totaled $45.5 billion. In addition, the FDIC has a $100 billion committed line of credit from the US Treasury as a backstop. We do not anticipate that the FDIC will have any problems meeting its obligations to cover any covered losses in insured deposit accounts.
The FDIC is an independent agency of the United States government. Both the FDIC and the Fund are paid for by the banking industry, and not from the U.S. taxpayers. A default by the U.S. government on its obligations will have no impact on the FDIC or the FDIC Deposit Insurance Fund. Since 1933, no depositor has ever lost a single penny of FDIC-insured funds.