Somebody is going to have to pay for the billions the Federal Deposit Insurance Corp. is spending to rescue such banks as Bank of New England - and it probably won't be the banks, reports Changing Times, the Kiplinger magazine.
If the FDIC takes too much of their remaining capital, insolvencies will worsen. Some bankers think the answer to their profit squeeze is to diversify into new businesses, such as insurance and securities. But Congress and the Treasury probably won't let them expand.Besides, it's unlikely that sales commissions on insurance or mutual-fund fees could make up what banks are losing on real estate and, increasingly, consumer loans.
As those solutions fail, Washington is likely to ask taxpayers to help pay the tab.