Treasury likes it, the Federal Deposit Insurance Corp. likes it, and the banking industry likes it—that is, S. 541, introduced last week by Sen. Chris Dodd (D-Conn.) The bill would permanently increase the FDIC’s ability to borrow from the Treasury for its Deposit Insurance Fund, raising the cap to  $100 billion from $30 billion, the limit set back in 1991. The Depositor Protection Act would also temporarily allow the FDIC to borrow up to $500 billion after consultations with Treasury, the Federal Reserve, and the President.

FDIC chairman Sheila Bair voiced enthusiasm in a letter to Dodd, noting “the FDIC believes it is prudent to adjust the statutory line of credit proportionally to leave no doubt that the FDIC can immediately access the necessary resources to resolve failing banks and provide timely protection to insured depositors.” Passage of the increased borrowing ability “would give the FDIC flexibility to reduce the size of the recent special assessment, while still maintaining assessments at a level that supports the DIF with industry funding.”

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