I’ve never had to make a claim on my auto insurance. I’ve carried auto insurance as long as I’ve owned a car, some thirty-plus years.
Yet, by law, I am required to pay my premiums or lose my driving privileges, or worse.
So how come banks didn’t have to pay their FDIC insurance for TEN years? Because Congress said they didn’t have to.
The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized – and that bank failures were so infrequent – that there was no need to collect the premiums for a decade, according to banking officials and analysts.
[FDIC Chair Sheila] Bair said yesterday that the agency’s failure to collect premiums from most banks “was surprising to me and of concern.” As a Treasury Department official in 2001, she said, she testified on Capitol Hill about the need to impose the fees, but nothing happened. Congress did not grant the authority for the fees until 2006, just weeks before Bair took over the FDIC. She then used that authority to impose the fees over the objections of some within the banking industry.
2006 – hmmm – who was running the show up until then? Oh, yeah, the Republicans.
“That is five years of very healthy good times in banking that could have been used to build up the reserve,” Bair, a former professor at the University of Massachusetts at Amherst, said in an interview. “That is how we find ourselves where we are today. An important lesson going forward is we need to be building up these funds in good times so you can draw down upon them in bad times.”
Hurley agreed with Bair’s analysis of the FDIC’s dilemma. “Typically you would build up a reserve during the halcyon days to protect yourselves during a recession,” he said, calling the decision to stop collecting most premiums “a political one” that was pushed by banks and not based on strict accounting principles.
But James Chessen, chief economist of the American Bankers Association, said that it made sense at the time to stop collecting most premiums because “the fund became so large that interest income on the fund was covering the premiums for almost a decade.” There were relatively few bank failures and no projection of the current economic collapse, he said.
“Obviously hindsight is 20-20,” Chessen said.
Oh. Dear. Gawd. Could you be any more of an idiot?
Two sets of rules. One set for us and one set for them.