What Does The FDIC’s 2010 Operating Budget, Approved Today, Tell Us?

Budgets can tell a lot – and the 2010 budget approved today by the FDIC’s Board of Directors is no exception. The approved budget of $4 billion is an increase of more than $1.4 billion (55 percent) from 2009. Why the sharp rise? FDIC head Sheila Blair said

that the 2010 budget “will ensure that we are prepared to handle an even-larger number of bank failures next year, if that becomes necessary, and to provide regulatory oversight for an even larger number of troubled institutions." 

The receivership funding component of the 2010 budget, the vast majority of which is funded by receiverships, will be $2.5 billion, up from $1.3 billion in 2009. This includes funding for the continuing work associated with bank failures that have occurred over the past two years. The budget also contains contingency funding for the possible continuation of an elevated number of bank failures in 2010. The 2010 budget increase also is partially attributable to increased supervisory activity related to the rising number of troubled banks which the FDIC oversees.
 
It also should be noted that, in conjunction with its approval of the 2010 operating budget, the FDIC board additionally approved an authorized 2010 staffing level of 8,653 employees, up from 7,010 in 2009. According to the FDIC, almost all the additional staff will be hired on a temporary basis primarily to assist with bank closings; to perform follow-on work related to the management and sale of failed bank assets; and to conduct bank examinations and perform other bank supervisory activities.
 
Oh, there’s one other thing about the budget that’s worthy of mentioning: none of the increase will involve the use of taxpayer funds, because all of the FDIC's operating expenses are paid from the Deposit Insurance Fund, which is fully funded by the deposit insurance premiums paid by individual banks around the country.