Last February, I noted that the FDIC was hiring, which is never a good sign for the economy. Of course, it is a sign that the banking system is ailing. The FDIC insures $4.5 trillion of deposits and it has $53 billion in assets. The ratio of assets to insured deposits on March 31, 2008 was 1.19%. The FDIC's takeover of IndyMac will shrink FDIC assets by $4 to $8 billion. In the next few years, it is likely somewhere between 100-300 banks will fail, with a large regional bank failure likely, and a big bank failure a distinct possibility. The FDIC charges healthy banks $.05 for every $100 in deposits, and up to $.43 for weak banks. In order to increase its assets, the FDIC will increase the cost of its insurance. An increase of $.10 per $100 in deposit will yield an additional $7 billion a year. Any increase in bank costs will strain the banking system further, but the FDIC really doesn't have a choice. The FDIC has a $30 billion credit line from the Treasury that it has never used. I will be surprised if they aren't forced to draw on it in coming years.

If you have more than $100,000 in a CD or on deposit with a bank, you can use the Certificate of Deposit Account Registry Service that can offer FDIC insurance on deposits of $50 million, by spreading the money through the 2,274 participating banks.

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