An Interesting Read

I stumbled across this during my web surfing and found it amusing.-Lou

The following is an excerpt from an article, The Mythical FDIC Fund, by William M. Isaac, former Chairman of the FDIC. It should be titled:

WHAT BILL FOUND OUT WHEN HE WENT TO WASHINGTON DC
8/27/08

THE MYTHICAL FDIC FUND By William M. Isaac

William Isaac, former Chairman of the Federal Deposit Insurance Corporation, (FDIC)

…When I became Chairman of the FDIC in 1981, the FDIC's financial statement showed a balance at the U.S. Treasury of some $11 billion. I decided it would be a real treat to see all of that money, so I placed a call to Treasury Secretary Don Regan:

Isaac: Don, I'd like to come over to look at the money.

Regan: What money?

Isaac: You know . . . the $11 billion the FDIC has in the vault at Treasury.

Regan: Uh, well you see Bill, ah, that's a bit of a problem.

Isaac: I know you're busy. I don't need to do it right away.

Regan: Well . . . it's not a question of timing . . . I don't know quite how to put this, but we don't have the money.

Isaac: Right . . . ha ha.

Regan: No, really. The banks have been paying money to the FDIC, the FDIC has been turning the money over to the Treasury, and the Treasury has been spending it on missiles, school lunches, water projects, and the like. The money's gone.

Isaac: But it says right here on this financial statement that we have over $11 billion at the Treasury.

Regan: In a sense, you do. You see, we owe that money to the FDIC, and we pay interest on it.

Isaac: I know this might sound pretty far-fetched, but what would happen if we should need a few billion to handle a bank failure?

Regan: That's easy - we'd go right out and borrow it. You'd have the money in no time . . . same day service most days.

Isaac: Let me see if I've got this straight. The money the banks thought they were storing up for the past half century - sort of saving it for a rainy day - is gone. If a storm begins brewing and we need the money, Treasury will have to borrow it. Is that about it?

Regan: Yep.Isaac: Just one more thing, while I've got you. Why do we bother pretending there's a fund?