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FDIC couldn't cover a big bank bailout without taxpayer support

To the editor: In response to a letter from California Bankers Assn. chief Rodney Brown about my concern with Congress repealing an important financial reform, it should escape no one that the public is still on the hook when the largest banks face their next financial crisis. ("How easing federal bank rules helps consumers," Readers React, Dec. 14)

As a reminder, when the financial industry imploded in 2008, Congress had to pass a special law to fund a $700-billion bailout, of which nearly $250 billion went directly to the largest banking firms. The Federal Deposit Insurance Corp. had nowhere near enough resources to fund their resolution.

Today, with assets of nearly $11 trillion and derivatives worth $4 trillion, the eight largest U.S. banks are far bigger and hold more derivatives than in 2008. Compare those numbers with the FDIC insurance fund of $54 billion. For now, it is misleading to suggest that should any of the largest banks fail, the FDIC could resolve it without taxpayer support.

Finally, for those who will tell you that the bailout funds were paid back with interest, I would add to their tab the cost of the millions of American jobs lost and the painfully slow economic recovery.

Thomas Hoenig, Washington

The writer is vice chairman of the FDIC.

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