In theory, can FDIC fail?

Question

In theory, can FDIC fail? If it goings default, who is going to cover the customers?

Will the federal reserve automatically prints money to keep FDIC alive? Or such decision must be made through a voting?

Answer 1

First of all the FDIC has existed for more than 80 years, it was founded during the great depression, therefore I think they understand what they are doing.

One positive sign was that during the great recession in the 2008 time frame the amount insured went from $100,000 to $250,000, that was done to not panic the bank customers.

Even when a bank goes under, it doesn't mean that the bank is worthless. Many of their loans are still good. Many times the failed bank is merged with another bank.

This is from the FDIC Symbol of Confidence:

FDIC's Deposit Insurance Fund

The FDIC is funded by its member institutions through premiums and assessments paid on deposits. And, if ever needed, the FDIC can draw on a line of credit with the U.S. Treasury.

Full Faith and Credit of U.S. Government

FDIC deposit insurance is backed by the full faith and credit of the United States government. This means that the resources of the United States government stand behind FDIC-insured depositors.

The current balance in the insurance fund is strong: This is from a September 2022 press release

The Reserve Ratio for the Deposit Insurance Fund Rose to 1.26 Percent: The Deposit Insurance Fund (DIF) balance was $124.5 billion on June 30, up $1.4 billion from the end of the first quarter. The reserve ratio rose three basis points to 1.26 percent, as insured deposits fell 0.7 percent.

Answer 2

The FSLIC was a quasi-governmental agency that provided insurance for deposits at savings and loan banks and it went bankrupt during the 1980s banking crisis.

The cash that the FDIC has only covers a fraction of the assets that it covers. It too could become insolvent. It was on the way to insolvency during the 2008 GFC.

However, the US government backstops the FDIC so although it could become insolvent, the taxpayer will always bail them out.

Answer 3

Short answer is yes, FDIC can fail and go bankrupt similar to SIPC.