This is the Cato Daily Podcast for Monday, September 28th, 2009. I'm Caleb Brown.

The FDIC may soon borrow from healthy banks to continue to provide relief to those teetering on the edge.

Mark Calabria, Director of Financial Regulation Studies at the Cato Institute, says that move would

put key players in the banking system at cross purposes.

Essentially they are quickly running out of money.

You've gone from a deposit insurance fund about two years ago that started out a little bit more than 50 billion dollars in reserves and has dwindled to under 10 billion and is continuing to see the clients.

So as we continue to see bank failures, you know, those failures are going to hit the fund.

They're going to have to borrow or find other sources to make up for that at some

point. There is a general consensus that we might not know where the FDIC will go to replenish that fund but they will probably have to go somewhere at some point soon.

Sheila Bear has said explicitly all auctions are on the table for replenishing the fund from borrowing from large healthy banks

to borrowing from Treasury, what do those options mean? Well, to preface one must keep in mind that Sheila

Bear is the chair at the FDIC. She's got four other board members to contend

with all who have very different interests and very different perspectives.

So part of this is an issue of, you know, she can't just sort of jam something through.

There's got to be a consensus under which direction to go.

Ultimately, those funds need to come from somewhere.

Essentially, you have at the moment three options in the table.

More might come.

One option is she could go borrow money from the Treasury.

The Treasury has the authority to lender that money.

The Treasury would have to approve that loan,

but she could go borrow money from the Treasury.

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