Watch that Debt Ceiling Now, Kids
I'm not sure if this makes me want to cry or throw up. Maybe both.
A legal limit on U.S. debt may put pressure on the Federal Deposit Insurance Corp. to replenish its coffers by assessing fees on banks rather than borrowing.
The FDIC board is set to meet next week to decide how to refill funds depleted by 94 bank failures this year. The options include new assessments on banks, tapping a $100 billion line of credit with the Treasury Department, or borrowing money from banks or debt markets.
One scenario the FDIC says it is considering would involve asking banks to pay future insurance fund assessments in advance. Banks could pay upcoming fees now, while they are holding cash anyway. Later on, banks would receive credit for fees already paid, which could free up more cash for lending in the future.
“Pre-paid assessments would allow the FDIC to replenish the Deposit Insurance Fund in a way that does not permanently damage banks’ financial viability,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York.
Any new government borrowing brings the outstanding U.S. government debt closer to the $12.1 trillion limit. Tapping the FDIC’s line of credit or borrowing through the Federal Financing Bank or from private banks also would have implications for the debt limit, Treasury spokesman Andrew Williams said in an interview.
The Obama administration has been pressing lawmakers to lift the debt cap, which Treasury Secretary Timothy Geithner warned last month may be reached later this year.
Umm... shouldn't we take this as a sign? Or is that too obvious?