Now banks will help FDIC instead of Treasury

The Federal Deposit Insurance Corp may ask healthy U.S. banks to lend billions of dollars to restore the health of the depleted fund that safeguards bank deposits, the New York Times reported, citing senior regulators.

The paper said the initiative, which has gathered strong support across the board, is seen as a more attractive alternative to tapping the $500 billion line of credit with the U.S. Treasury, or yet another emergency assessment.

According to the paper, the FDIC was reluctant to approach the Treasury department for additional funds, since any new borrowing could be seen as a bailout, and have a strong political reaction.

The FDIC, whose board members were yet to reach a consensus on the issue, is expected to issue a proposed plan next week, to replenish the dwindling fund, the paper said.

Source: Reuters