In a rare move for any government agency, the Federal Deposit Insurance Corp.
on Thursday launched a media offensive
against a Bloomberg News report that FDIC public affairs director Andrew Gray called "a serious disservice" to readers. The Bloomberg story in question suggested that "it won't take many more failures before the FDIC itself runs out of money."
It also said that a federal takeover of troubled thrift Washington Mutual (WM)
"could cost taxpayers $24 billion more, according to Richard Bove, an analyst at Miami-based Ladenburg Thalmann & Co." Read the full Bloomberg story
"The FDIC has all the tools and resources necessary to meet our commitment to insured depositors, which we view as sacred," Gray's letter read. "Our ability to raise premiums essentially means that the capital of the entire banking industry – that's $1.3 trillion – is available for support."
Gray's statement is nearly an echo of remarks by FDIC chairman Sheila Bair on Sept. 5
, in which she said "the fund has all the resources and the tools we need to meet our commitment to insured depositors."
The FDIC has been facing increasing scrutiny over the possibility that it may not have sufficient funds to manage an expected spate of pending bank failures tied to the nation's mortgage and housing crisis.
Recent bank failures, particularly the failure of IndyMac Bank in Pasadena, Calif. earlier this year, have pushed the insurance fund’s reserve ratio below the 1.15 percent statutory minimum, something Bair said in Sept. that FDIC officials expected would happen. She emphasized that the FDIC has a line of credit with the U.S. Treasury, if needed, and said the agency would look to hike insurance premiums going forward — with the majority of the premium increases going towards more at-risk banks.
The FDIC last had to use its line of credit with the Treasury in early 1990s.
The FDIC's strong response comes as regulators are growing increasingly worried about a possible run on some banks, according to sources quoted in the Bloomberg story. The story cites Joseph Mason as saying that "rhetoric" from the FDIC "masks the agency's inability to grasp the scope of the coming crisis."
Others are more sanguine about the banks' ability to self-fund their way through this crisis. Bert Ely, a well-known banking and finance expert, recently suggested that banking industry could still manage the financial mess that lie ahead.
"Assuming that bank insolvency losses don't get way out of line, which I don't think they will, then the industry can handle it," he told Institutional Risk Analytics' Chris Whalen recently
." It's not going to be cheap, but the banks can handle it and clean up their own mess."
Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.