The Deposit Insurance Fund’s (DIF’s drawdowns to cover recent bank failures have not impaired the fund’s soundness, FDIC Chairman Sheila Bair said in a recent speech to the Florida Bankers Association. “The insurance fund is in a strong financial position to weather a significant increase in bank failures,” Chairman Bair declared. The fund currently has a balance of $45 billion, plus a steady stream of premium income — a stream that will increase when the agency raises premiums in October.

Bair noted that the fund is 100 percent industry-backed — in effect, “the capital of the entire banking industry is available to support the fund.” The FDIC also has a $30 billion line of credit at the Treasury, but Bair says she sees no chance the agency will have to use that line. “For short term liquidity needs, we also have a separate credit line at the Treasury,” she noted.

Finally, the agency can use illiquid assets of failed banks as security to borrow from the Treasury’s Federal Financing Bank. “Our need to draw on [the] Federal Financing Bank will depend primarily on the pace of bank failures and how fast we sell failed bank assets,” she said.

“We will certainly see more banks fail,” Bair admitted. “But given the stress analyses … that we’ve been doing for over a year, we’re confident that our industry-funded resources available to the insurance fund are more than enough to cover projected losses.”

And ultimately, she concluded, “Insured deposits are guaranteed by the full faith and credit of the United States government.”