FDIC May Be Prohibited To Borrow From US Treasury Due To Federal Debt Ceiling Limitations

Even as the FDIC is scrambling to find ways to replenish the practically empty Deposit Insurance Fund, one of its options, namely borrowing from the Treasury, may be a non-starter due to the eggregious monetization by its counterparty, the Federal Reserve, as both run up against the Federal debt ceiling. According to Bloomberg:

Any new government borrowing brings the outstanding U.S. government debt closer to the $12.1 trillion limit. Tapping the FDIC’s line of credit or borrowing through the Federal Financing Bank or from private banks also would have implications for the debt limit, Treasury spokesman Andrew Williams said in an interview.

As for the debt cap, Zero Hedge is preparing to submit its petition to halt neverending debt ceiling increases to receptive Senators. Alas, those who care about this country's future have some serious opposition:

The Obama administration has been pressing lawmakers to lift the debt cap, which Treasury Secretary Timothy Geithner warned last month may be reached later this year.

The Treasury already has begun taking steps to cut back borrowing so it can stay under the limit while Congress deliberates. Last week, the Treasury said it would cut back its borrowing on behalf of the Federal Reserve as it seeks to keep government debt below the limit.

As was previously discussed on Zero Hedge and elsewhere, the unwind of the SFP may have something to do with the debt ceiling, although it is just as likely a means for the Fed to slip a little extra liquidity into the market as it sees fit:

The Treasury will reduce the outstanding borrowing in its Supplementary Financing Program to $15 billion “in the coming weeks,” the department said in a statement from Washington. According to government and private-sector estimates, this gives the Treasury an extra six to eight weeks of breathing room from Geithner’s previous estimate of a mid-October collision.

Either way, keep an eye out on this. After all the FDIC's primary responsibility is to be the backstop of US deposits, not to be involved in some complex political machinations that will likely merely further serve Wall Street. Another whisper of a potential run on the banks, and with the FDIC's caught in its current sorry state, it could very easily be game over for the finance-political complex.