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"Insurance" is the key word here, "insurance" and "promise of a no questions asked unlimited government handout" is not the same thing. Just like auto insuranc
by astura 8y ago
"Insurance" is the key word here, "insurance" and "promise of a no questions asked unlimited government handout" is not the same thing.
Just like auto insurance, everyone pays premiums to the FDIC which pools the money and claims are paid for using that pool.
- roywiggins 8y agoIn a really really bad situation, there's always the risk that the insurer also runs out of money. The FDIC would run out of money if its pool of money collected from premiums ran out. It's never happened, though they had to finesse it a bit during the 2008 crisis (they required banks to prepay premiums, which recapitalized it in the short term). If the FDIC fund ran out of money the insurance would have to be backed by... the US Treasury, basically? The government would have to open up a money spigot somewhere: either borrow it or print it. It looks like the FDIC has a $100 billion line of credit with the Treasury, so it could use that, but that is just moving money around inside the government.
- deleted 8y ago[deleted]