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They also announced that the fund, which began the year with more than $34 billion on hand but has been battered by bank collapses, would fall into deficit this week
The plan would raise $45 billion from the banks to replenish the fund, which is suffering severe problems with both its capital and liquidity.
WASHINGTON -- The government said the fund that protects consumer bank deposits has fallen into the red and will remain there into 2012, a pointed symbol of how the aftershocks of the financial crisis will reverberate for years as banks continue to fail at a high rate.
The negative balance is a headache for the Federal Deposit Insurance Corp., which runs the fund. On Tuesday, it proposed the unprecedented step of having the banking industry prepay $45 billion in fees by the end of the year to give the government more breathing room to handle future failures.
How do you insure hundreds of billions of dollars worth of accounts up 250k and be, not just broke, but in debt?