Solution to the FDIC Deposit Insurance Fund: A Response Essay Example

Insured banks in 2009, followed by 157 banks in 2010. This increase put considerable strain on the FDIC DIF. The authors acknowledge that the FDIC collects assessments from insured financial institutions to fund the DIF, and that the rate of assessments is determined by assigning banks to groups based on their CAMEL rating (capital, assets, management, earnings, liquidity and sensitivity to market risks). Banks considered more likely to fail are subjected to higher assessment rates. However, despite these efforts, the balance of the DIF remained stagnant at the start of 2010.

According to Tasto and Randolph, the most effective options for solutions are "ex ante collections" and a "hybrid method" which allow funds to be collected before they are needed, but also permit special assessments after the fact. The International Association of Deposit Insurers (IADI, 2008) notes that four-fifths of nations use these approaches because they ensure collection from all banks and distribute insurance costs over time, providing assurance to the system. The authors explain how the FDIC implemented the ex ante funding system and continued using the CAMEL rating system, but the issue was not completely resolved. They believe that although the FDIC has taken steps towards restoration, the damage requires an urgent injection of funds into the DIF and thorough evaluation of bank failure risk. Tasto and Randolph assert that further analysis will be necessary to prevent further failures, regardless of the solution chosen.

I concur with Tasto and Randolph's suggestions for addressing the FDIC DIF issue. Their report provided comprehensive insights into the status of FDIC DIF at the time of writing, including detailed graphical representations of the challenges facing the Deposit

Insurance Fund. Furthermore, their thesis statement effectively presented discussion questions for educators to use in their courses. By leveraging information from the International Association of Deposit Insurers, Tasto and Randolph's proposed solution was deemed trustworthy.

In my opinion, Tasto and Randolph should have presented the specific nations that used the solutions proposed by IADI along with relevant statistics. By presenting statistical graphs of each solution side by side, it would have been easier for instructors to visualize the solutions in action. In conclusion, there is no quick fix for restoring the FDIC fund, regardless of the method employed. Michael Tasto and Gregory Randolph, who are professors at Southern New Hampshire University, authored an article addressing potential solutions for replenishing the FDIC Deposit Insurance Fund. After perusing this article, I believe that instructors now possess a more comprehensive understanding of the state of the FDIC DIF, enabling them to hold informed discussions with their students.