September 22, 2009

The FDIC has a new plan to save itself, one that has already prompted cheering and backslapping in the banking industry.Instead of hitting the industry with a huge one-time fee, which would hurt profits and stock prices, and instead of running hat in hand to the Treasury for a direct bailout, which would force Sheila Bair to genuflect before Tim Geithner, the FDIC will borrow tens of billions of dollars from banks.

It might appear, of course, that the banking industry will be bailing itself out. But, really, the banking industry is just fronting the money: It's the taxpayer who is ultimately on the hook here. In the meantime, some members of the banking industry will make money.At least banks have to pay interest on the debt instead of the government (taxpayer), though. At least we hope that's what's happening.