FDIC's Insurance Deposit Fund: How's That for Under Capitalized?

| About: IndyMac Bancorp, (IDMCQ)

If you think Fannie Mae (FNM) or Freddie Mac (FRE) are under-capitalized, then how about this very rough, and very non analytical back of the envelope capitalization for the Federal Deposit Insurance Corporation [FDIC] insurance deposit fund?

Combined Deposit Insurance Fund Balance - $52.8 billion (before Indy Mac (IMB) failure).
Insured Deposits - $4.4 trillion.
Reserve Ratio - 1.19%.

Of course I am sure there is more to it than that. The FDIC can raise premiums, and ultimately, the U.S. Government is there.

Here are some historical nuggets that I gleaned from the same page:

1) The chart goes back to 1990, which is the year that failed assets peaked at $145.339 billion. Indy Mac has $32 billion in assets so we are already at 20% of the 1990 peak.

2) The fund balance went negative in 1991, at $6.9 billion.

3) The current reserve ratio of 1.19% is the lowest since 1995, when it was 1.08%. This is calculated before the latest bank failure. If we use the mid point of the estimated losses of $4-8 billion, then the fund balance falls to $46 billion, and the reserve ratio falls to approximately 1.04%.

I don't understand why the FDIC let the reserve ratio run down from a high of 1.38% in 1999, considering that everyone and their mother saw this storm coming. During the good times they should have over-assessed the banks to prepare for this.