The Federal Deposit Insurance Corporation provides security for bank deposits. Literally. Its mission is to provide insurance for deposits. Its ability to take on obligations is capped by Federal Law at $30 Billion or $30,000,000,000.00. See Andrew Ross Sorkin, "Dealbook/'No-Risk' Insurance at F.D.I.C." p. B1, col. 1 (New York Times Nat'l Ed., Business Day Section, Tuesday, April 7, 2009).
Now it is proposed that the FDIC also become the FLIC, the Federal LOAN Insurance Corporation. Under the pending Treasury Department proposal for a "public-private initiative" to buy toxic assets, the FLIC, er, FDIC would insure up to 85% of all investments by private parties. Unfortunately, the projected exposure to insure up to 85% of all investments is reportedly between $1 Trillion and $2 Trillion, or between $1,000,000,000,000.00 and $2,000,000,000,000.00. See id. The cap of $30 Billion would stay. The current Administration clearly does not want to ask Congress to change the cap.
This is where lawyers and CPA's apparently have rushed in, both groups clearly consulted for the purpose of providing desired opinions.
Unknown, unnamed "lawyers" gave an interpretation of this Federal Law in October, 2008 to Ms. Sheila Bair, head of the FDIC. They reportedly interpreted the $30 Billion cap to apply to "contingent liabilities," meaning the "expected cost" to the FDIC.
"That's how we've interpreted it," Ms. Bair relayed. Id.
When the lawyers were done, unknown and unnamed CPA's stepped in to tell Ms. Bair and the FDIC that they project no losses to the FDIC for insuring $1 Trillion in investments under the new Treasury Department "public-private initiative". The "expected cost" to the FDIC is thus nothing.
"Our accountants have signed off on no net losses," Ms. Bair reported. Id.
In the real world, the "insurance" proposed to be provided by the Federal Loan Insurance Corporation, without changing its name from the Federal Deposit Insurance Corporation, is really a guarantee by the Federal Taxpayer that will not be paid, in the event of a disaster, by unknown, unnamed lawyers and CPA's. The payments then will come strictly from the Federal Taxpayer. Guaranteed.
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