FDIC’s Deposit Insurance Fund Reserve Ratio Plunges To 0.27% Of Deposits

The FDIC’s Deposit Insurance Fund has plunged to an all time low of just $13 billion as of March 31, or 0.27% of $4.8 trillion in insured deposits. It is worth nothing that since March 31, 15 new banks have failed which includes the biggest one so far this year, BankUnited (which Marla has a special fondness for in her heart and will be providing some ongoing entertainment on). It is thus safe to say that the $13 billion has been spent in the past 2 months, especially since banks no longer issue debt under the TLGP (of which, nonetheless, there was $336 billion outstanding at March 31 - somehow when banks are talking about repaying TARP, their FDIC-guaranteed debt, by far the biggest crutch to the banking system, is conveniently never mentioned) and therefore no longer pay FDIC guaranteed debt issuance associated fees. For many more thoughts on this phenomenon, go here.

Also, DIF-Insured deposits have hit an all time record high of $4.8 trillion, an increase of $90 billion from December 31 as depositors have been seeking a safe haven from the market in Q1. It is unknown if they would have done so, had they known their “insured” deposits will cover only the first 0.27% of depositors if there is another bank failure tsunami. As there is only one more month left in Q2 it will be curious to see it there will be a rotation out of deposits into investments at June 30, concurrent with the time we will know what the current level on the DIF is. Of course, as this data will be available some time in September, by then it may be completely worthless as one would imagine at some point the mystical futures buying force, end of month convenient fund deleveraging, or whatever else you want to call it, will have finally exhausted its market pulling strength.

Read more….