FDIC must decide fast how to replenish its depleted bank insurance fund

The FDIC is running out of time to make a crucial decision about how to raise funds to rebuild its dwindling insurance fund. If it wants to raise funds by a special assessment, it must announce that it's doing so by Sept. 30 so that banks can set aside funds in the next quarter.

The FDIC must raise funds to make up for the shortfall caused by the 95 bank failures that have already occurred in 2009 -- up from 25 in 2008 and just three in 2007. In the third quarter of 2009 alone, 50 institutions were closed, costing the FDIC $14.9 billion.

The second quarter insurance fund balance was just $10.4 billion. Even though regular bank assessments were collected during that quarter, the fund must be close to depletion. Also, the number of banks on the FDIC Problem Bank List continues to grow. It increased to 416 financial institutions as of June 30, up from 305 as of the end of March. This is the largest number of problem banks since June 30, 1994, when the nation was at the height of the savings and loan crisis.