The Biggest Busted Bank Of Them All

The FDIC's fund for dealing with busted banks is rapidly running out of money, and the fund itself could be in the red before the end of the year. Eighty-one busted banks will do that.

The coffers of the Federal Deposit Insurance Corp. have been so depleted by the epidemic of collapsing financial institutions that analysts warn it could sink into the red by the end of this year.

That has happened only once before — during the savings-and-loan crisis of the early 1990s, when the FDIC was forced to borrow $15 billion from the Treasury and repay it later with interest.

The FDIC on Thursday will disclose how much is left in its insurance fund, and update the number of banks on its list of troubled institutions. That number shot up to 305 in the first quarter — the highest since 1994 and up from 252 late last year.

FDIC Chairman Sheila Bair may also use the quarterly briefing to discuss how the agency plans to shore up its accounts.

Small and midsize banks across the country have been hurt by rising loan defaults in the recession. When they fail, the FDIC is responsible for making sure depositors don't lose a cent. It has two options to replenish its insurance fund in the short run: It can charge banks higher fees or it can take the more radical step of borrowing from the U.S. Treasury.

And as I said last night, with dozens of banks effectively insolvent, it's only a matter of time before the FDIC has to raise billions from somebody. Who's going to pay for all this?

Here's a hint: who's been paying for all this so far? Here's another hint: it sure as hell hasn't been the banks.