Bill Introduced to Loan FDIC $500 billion

The Wall Street Journal is reporting:

Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.

The Connecticut Democrat's effort -- which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner -- would give the FDIC access to more money to rebuild its fund that insures consumers' deposits, which have been hard hit by a string of bank failures.

Why is this significant? At minimum the FDIC is preparing for a lot more bank failures. Currently the loan limit is $30 Billion and the FDIC is primarily funded by fees paid by banks.

New Deal Democrat wrote earlier on the history of the FDIC part I, FDIC, part II and part III.

In that analysis it was clear the FDIC wouldn't run out of money except in the most extreme set of circumstances....

So, considering one must just cover deposits, exactly what kind of extreme circumstances are we dealing with or is the role of the FDIC going to expand?

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