Banks to Bailout Government?

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Steve Labaton of the New York Times reported that senior regulators at the Federal Deposit Insurance Corporation (FDIC) are seriously considering a plan to have the nation's "healthy banks" loan money to the government to replenish the FDIC insurance fund that protects bank depositors. The fund, which has been tapped to protect deposits in close to 100 failed banks, is rapidly running out of money. Generally federal agencies are wary of using funding mechanisms that might give the appearance that they have been "captured" by the very institutions they are charged with regulating. But apparently FDIC chair Sheila Bair would rather pursue this cockeyed strategy than ask sparring partner -- Treasury Secretary Timothy Geithner -- for a government check. Not surprisingly, banks welcomed this development with open arms. The Independent Community Bankers of America's Karen Thomas claimed, "Borrowing from healthy banks instead of the Treasury has the advantage of keeping this in the family. It is much better for perceptions than having the fund borrow from someone else." If the banksters really think we are all one great big family, perhaps they'll start giving consumers a break on 27% credit card interest rates.