Word: fdic
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...probably that of Lydia Lobsiger, the happy and relieved East Peoria, Ill., widow who in 1934 was the first American to get her little pile of savings back from the feds after a terrifying run on her local Fon du Lac State Bank. Now, almost 75 years later, the FDIC has been busy projecting a newer face, and it belongs to Sheila Bair, a 54-year-old lawyer from Kansas...
...Monday, Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and FDIC chairwoman Sheila Bair announced a widely expected effort to inject $250 billion in government funds into the troubled U.S. banking system. The goal: to get banks lending again and keep the economy from grinding to a halt. The funds will come out of the $700 billion bailout package already passed by Congress...
...other significant parts of the new plan are funded from other sources, and won't add to the taxpayer tab. The Federal Deposit Insurance Corporation (FDIC) will guarantee certain bank accounts - those mostly used by businesses for payroll and other expenses - above the current $250,000 limit. The FDIC will also guarantee lending between banks by creating a new kind of debt. The FDIC is calling this program a "Temporary Liquidity Guarantee...
...That worries economists, as bank failures exacerbate the already bleak situation by decreasing the amount of lending in the system. That's one reason most now predict the country will sustain a protracted recession even if it manages to avoid the kind of systemic risk the FDIC feared a disorderly and public Wachovia failure might have brought...
...Markets may feel better about a joint European commitment announced Sunday to guarantee certain bank loans and recapitalize banks. Unfortunately, disappointment in the markets, the failure of another major bank or other dramatic events may yet produce another early-morning FDIC board determination that the American financial system as a whole is at risk...