QuoteOriginally posted by: ppauperBill Seeks to Let FDIC Borrow up to $500 BillionAt some point, a great deal of the deposits in U.S. banks are going to end up on the US government's balance sheet. TBill-CD spreads are really high right now. I find it more than a little frightening that private banks (e.g., GMAC!) can offer whatever CD rate they want knowing that the FDIC is there to catch them. And the innovation that lets a network of banks distribute a depositor's CD (to provide FDIC backing for as much as $50 million) wil only increase the eventual public burden.The brouhaha over the hike in FDIC fees (to cover help cover the flood of failing banks) suggests that one long-term solution is to make FDIC fees a regressive function of reserve ratios. Well capitalized, conservative banks would pay low FDIC fees, and more highly leveraged banks would pay increasing fees. And, yes, this would be pro-cyclical for troubled banks which would enter a death spiral of rising fees and declining reserves but I'd rather see the system include a strong culling mechanism. Moreover, given the capital structure of most banks, such a regressive FDIC fee schedule would effectively automatically convert bond-holder money (or CDS writer money) into depositor coverage. Thus, bond-holders would finance the liquidation of the bank and provide just a little bit more incentive to for due diligence.