When FDIC Insurance is needed most, the government, not banks, ends up paying for the coverage

Physorg.com - Flawed deposit insurance programs need reform, banking expert says

The FDIC insurance program is not just administered by the government but also subsidized by it when times get tough. The FDIC reimburses premiums when there are few failures but raises them when there are many failures, which is a premium increase at a time when other banks are at risk of failure too. When one becomes 'too big to fail' or when there appears to be the possibility of widespread failure, the government has historically stepped in with a bailout-- money that isn't coming from premium payments anymore and is coming directly from the Treasury. In the 1980s the savings and loan scandal cost the government $124bl. The article is mostly reporting the work of George Pennacchi, who has written a book published by a conservative think tank, the American Enterprise Institute, where he is reporting his findings. He includes many policy and reform suggestions in the article, one of which being an insurance program similar to the ones that insure credit default swaps. This could double the premiums banks are accustomed to paying under FDIC.