The Federal Deposit Insurance Corp. is expected today to discuss the status of its nearly yearlong program to guarantee bank liquidity destabilized by the crisis.
The Temporary Liquidity Guarantee Program — which was launched in October 2008 and offers banks blanket coverage of no-interest checking deposits and backing of their senior unsecured debt — is on the agenda for the FDIC's 10 a.m. board meeting.
Last month the agency extended by six months the extra deposit coverage through June 2010. But the agency also made it more expensive to participate in the extended coverage. In the first year of the program, institutions paid 10 cents for every $100 guaranteed. Under the extension, banks will have to pay one of three rates — 15 cents, 20 cents or 25 cents — to be determined by their level of risk.
The FDIC similarly extended and charged higher fees for the debt guarantee program in March. The agency gave institutions and holding companies four more months — until the end of October — to issue guaranteed debt. Issuances are covered for maturities of up to three years. Those taking advantage of the extension must pay surcharges beyond the standard program fees.
However, FDIC Chairman Sheila Bair has indicated that the debt coverage will not be extended any further.