The FDIC and its accounting tricks

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My colleague Steve Gandel has a nice piece about the strange contortions the FDIC is now going through to avoid tapping its credit line with the U.S. Treasury. He writes:

The agency has a credit line with the Treasury to tap as much as $500 billion in emergency capital through the end of next year. But the FDIC is worried that if the agency, which has always been privately funded through bank assessments, borrowed money from the Treasury, it would look like a new bank bailout, eroding the sliver of confidence the public has regained in our nation’s banking system in the past few months.

Maybe that’s what they’re saying at the FDIC. But I think they’re mainly avoiding that Treasury credit line because they know that tapping it would mean lots of screeching on the media and on Capitol Hill, and probably a few unpleasant appearances before skeptical Congressional subcommittees for FDIC Chairman Sheila Bair. It would erode confidence in the current leadership of the FDIC, but I’m not sure that it follows that this would erode confidence in the banking system. I tend to think using accounting tricks to paper over a shortfall is more corrosive of the public confidence than tapping a danged credit line. But maybe that’s just me.

I’m writing this from Terminal A of Richmond International Airport, where I’m waiting for a flight back to NYC. I’ve seen no evidence of any international flights coming in or going out, but I guess somebody must have flown to Mexico or Canada from here at some point. They are playing David Gray on the sound system, and he’s English, so maybe that explains the name. In any case, I’m not complaining, and I like the free wifi.

I was in Richmond to give two speeches, one to a conference of bank examiners at the Federal Reserve Bank of Richmond, the other to the CFA Society of Virginia. With the bank examiners I ended up talking mostly about the media and the financial crisis; at the CFA Society I was flogging my book. I must have been too hard on the media, because during the Q&A one of the bank examiners got up and defended the new, more atomized media landscape as a better place to find good information than the old media oligarchy was. I had to agree with him (it’s also a better place to find propaganda, bad information, etc., but that doesn’t cancel out all its wonders). Yay, bank examiners!

Update: The wages of my speechmaking: