Mumbai: The Federal Deposit Insurance Corporation (FDIC) could be the latest in the line for federal bailout as the cash-strapped agency tries to prop up failing banks across the United States.
FDIC may be forced to borrow money from the treasury department to see through an expected wave of bank failures, the Wall Street Journal quoted its chairwoman as saying in an interview.
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.
As of 26 August, FDIC had 117 ailing banks under its care and held $78 billion in distressed bank assets even as the banking crisis goes from bad to worse, another report said.
FDIC will be holding on to the illiquid assets until the borrowed monies are repaid and the assets of the failed banks are sold.
''I would not rule out the possibility that at some point we may need to tap into lines of credit with the treasury for working capital, not to cover our losses," the Wall Street Journal quoted FDIC chairperson Sheila Bair as saying.
Meanwhile, FDIC will consider a plan in October to raise the premium rates banks in a bid to replenish the $45.2 billion fund it distributed among banks, a move that will further squeeze the industry.
The agency also plans to increase the premium for banks that engage in risky lending practices, the report said.
FDIC had to borrow from the treasury at the end of the savings-and-loan crisis in the early 1990s when thousands of banks had to close.