FDIC May Extend Credit Protection For a Price

     WASHINGTON (CN) – As the Federal Deposit Insurance Corporation phases out the Debt Guarantee Program, initiated to cover debt issued by insured banks during the financial crisis last fall, it seeks comment on whether the program should end Oct. 31, as planned, or be replaced with an emergency facility to guarantee debt for a price.

     The additional guarantees would be for institutions unable to issue non-guaranteed debt to replace maturing debt because of market disruptions or other circumstances beyond their control. After prior approval granted on a case-by-case basis, the FDIC would guarantee senior unsecured debt issued through April 30, 2010.
     Under this alternative, the FDIC would charge an annual participation fee of at least 300 basis points on any FDIC-guaranteed debt issued by participants, as a disincentive to use the facility unless absolutely necessary and to help defer the cost of the program.

%d bloggers like this: