The FDIC has a $500b line with Treasury. This borrowing could have been accomplished much cheaper if that route were taken. The reason that did not happen is just more optics. If the FDIC had borrowed from Treasury the word ‘bailout’ would have been uttered. We wouldn’t want that to happen would we?
This is just a measly $1.8b. So who cares? At the end of the day no one will. But this debt, like all of the other $7 Trillion of liabilities will not appear on the balance sheet of the US. But it should. No one wants to tell the truth of exactly how much debt the central government has. Much has been said of late of how Greece and others have manipulated their books to make things “look better”. This is just another example of how the US is doing exactly the same thing.
The most troubling thing about this deal is the precedent being set. The final line from the FDIC on the transaction:
This offering marks the first issuance of notes by the FDIC since the early 1990s and the first issuance by the FDIC of FDIC guaranteed debt backed by the full faith and credit of the U.S.
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